2009 Predictions

[Bob1370]

Element9 says, "Better to s-can iBoc. There's a start. It would be easier to wide-band AMs, even the critical directionals."

Agreed. That's ALSO part of the solution for AM. IBoc was an answer to a question that wasn't being asked, because AM signals can be made comparable to FM's sound simply by allowing them to go wideband (like the old days of the 80s when we could transmit a 30-15,000 hZ signal in CQuam stereo) and telling receiver manufacturers to make sets that capture the full signal the way the old GE SuperRadios and Delco car stereos did. But more power, which would clearly be paid for out of the stations' own equipment budgets when they're due for their next transmitter upgrade (and hence no bailout except in a regulatory sense) would also be part of it. It's not always going to spread out your effective signal range--but it will be likely to improve your signal's punch within your primary coverage and market area, and that's significant.

 

[umtrr-author]

Look at Net Revenues in the industry and tell me radio is declining. Radio's net profit is huge. It may have gone down, but still huge. Check out one of the corporate balance sheets or financial statements

Er, many corporate balance sheets and financial statements would be filed under "fiction" at the local library, or should be. There is a powerful incentive to show positive results, especially if one's multi-digit multi-comma bonus depends on it.

That's assuming that the radio portion is sufficiently split out of said financials to be available for examination-- to be fair, a reasonable assumption for some corporations.

 

[Element9]

Look at Net Revenues in the industry and tell me radio is declining. Radio's net profit is huge. It may have gone down, but still huge. Check out one of the corporate balance sheets or financial statements

Er, many corporate balance sheets and financial statements would be filed under "fiction" at the local library, or should be. There is a powerful incentive to show positive results, especially if one's multi-digit multi-comma bonus depends on it.

That's assuming that the radio portion is sufficiently split out of said financials to be available for examination-- to be fair, a reasonable assumption for some corporations.

Well said, Author. Some of these companies make Madoff's Ponzi scheme look like child's play.

And the statement "radio's net profit is huge" is of little consolation to the hundreds who've caught a bullet in the last month.

 

[superset weekend]

Element, i am not saying that "radio has a huge net profit" is any consolodation to people who have been whacked or have taken pay cuts. That is an unfortunate part of capitalism. However, as and industry, and as seperate radio companies, you HARDLY hear of one going bankrupt. The radio industry is a money maker, period. I cannot say the same for Satellite radio. They are bleeding cash and i predict WILL go bankrupt in 2009.

We are all radio people on this board. We have got to stop continually slamming this industry we are in. If you can't take firings, and downsizing, move to a socialist country, or buy your own radio stations and change it. This is a big boys game now. The strongest survive on and off the air. Radio is thriving, and with the other digital opportunites we will have in our aresenal, radio is positioned to do even better. CHANGE IS GOOD.

 

[SirRoxalot]

Radio is thriving, and with the other digital opportunites we will have in our aresenal, radio is positioned to do even better. CHANGE IS GOOD.

GOOOOOOD egg nog, huh?

 

[Element9]

I was thinkin' Kool Aid, Rox, but given the season, eggnog works.

It's been a while, but what the hell.

This is a big boys game now. The strongest survive on and off the air. Radio is thriving, and with the other digital opportunites we will have in our aresenal, radio is positioned to do even better. CHANGE IS GOOD.

Change is good if it benefits the guy or woman on the front lines as much as it benefits the guys in the 7th floor corner office. But change mandated by some suit who pulled the pin on a grenade, held onto it too long then tossed it on the floor most often hurts the little guys more than the suits.

Element, i am not saying that "radio has a huge net profit" is any consolodation to people who have been whacked or have taken pay cuts.

Superset... with all due respect... um... Bwah?! I presume you mean "consolation," meaning "comfort or solace." OK, everybody gets one Mulligan on spelling and syntax, but seriously...

"Big boys game?"

Tell that to any of the people who've been pink slipped in Buffalo in the last year at Entercom, Regent or Citadel: Skip Edmunds, Gail Ann Huber, Bob "The Godfather" Gotti, Monica Wilson... and others who've been bounced, whose names now escape me but were worthy of discussion in threads on this board over the last year.

Radio has always been a tough business; not for the thin-skinned or faint of heart. But when good people get a ticket to the "un-enjoyment line" because some suits who are making $10 million a year made bad business decisions, something is very wrong... with the suits.

For the most part, we don't "slam" radio on this board for the sake of "slamming."

Yes we carp and bitch, but if you read this board regularly, you know there are people here (not meaning me) who are immeasurably knowledgeable and articulate. We offer opinions and speak truth to power (power that doesn't listen or doesn't know we're here) and couldn't care less.)

Here's one truth of this board: We're not in the business here of blowing sunshine up the butts of those who've mangled the business, whether it's the idiocy of iBoc or the gutting of live, local radio; bad programming or stupid management decisions.

As to being "radio people:" Whether we're still in the game or working in an associated business that comes in contact with radio, such as advertising, sales or promotion, it's likely radio is in our blood to some degree.

If you've been reading the Trades, The Wall Street Journal, The New York Times or Taylor On Radio on R-I, you know that companies like Emmis, Citadel, Cumulus, Entercom and others are getting smoked; perhaps not to the abysmal extent that Sirius-XM is getting smoked, but smoked nonetheless and let's say, it's not pretty.

Now then. Who's responsible for these companies' failures? The programmers and jocks who are putting up good numbers? The sales managers and sales people who are hitting their numbers on the street?

Or could it be the suffocating debt levels brought on by stupid decisions made by CEOs CFOs or COOs?

I know you're smart enough to offer the correct answer Superset, so I'll end my post here.

Best holiday regards,

-9-

 

[superset weekend]

Yes, I am smart enough to answer this. You'd be suprised what i know ! As for the good people you were talking about being let go, you are right, and it is a shame. Some of the people you mentioned are some of my best friends. It really does suck that people get let go. But those people you mentioned are very resiliant and will bounce back, better than when they had their lives controlled by corporate. Radio is a business, just like all other businesses. Plenty of industrys are getting government loans right now to stay afloat. Radio is not an industry that has been bailed out. It is surviving by hard work, a good business model, and changes in it's technologies and ways to reach people.

As for the companies you said are not in good shape, some of that is true. Some of those companies are in GREAT shape. If you simply look at a stock price as a valuation of a company, than every sompany should be down 40% this year, just like the Dow. That is not the case in most radio companies. They are public companies, just see for yourself. They are cutting expenses and re-aligning, just like every other industry.

This is not rocket science, listen to a radio station quarterly conference call and you will be in the loop.

 

[SirRoxalot]

Great Shape?

This is not rocket science, listen to a radio station quarterly conference call and you will be in the loop.

The quarterly conference call is corporate's attempt to paint lipstick on the pig that they're trying to sell to stockholders. I prefer to look at key statistics like enterprise value, total debt, revenue, earnings per share, operating cash flow, and others.

Take a look at the numbers. For example here are the Enterprise Value, Total Debt, and Earnings/Share for several of the major public companies:

Citadel: EV: 2.14B Total Debt: 2.10B Earnings/Share: -4.11

Cox: EV: 913.76M Total Debt: 420.53M Earnings/Share: -1.14

Cumulus: EV: 739.00M Total Debt: 724.66M Earnings/Share: -2.85

Entercom: EV: 910.32M Total Debt: 875.21M Earnings/Share: -2.60

Regent: EV: 191.91M Total Debt: 189.51M Earnings/Share: -3.79

Imagine if you bought a house, and didn't put much money down. You anticipated a pay raise, but instead got a pay cut. That's the situation that several companies are in right now. Revenue is dropping faster than they can cut expenses.

Meanwhile, the market for houses took a serious hit, which dropped the value of your house by 10%, 20%, or even 30%. You can't sell your house for enough to pay off your debt. That's the situation that several of the people above find themselves in right now. That's the biggest reason that many of them have been reduced to penny stock status. Several of these companies gambled that revenue would increase on properties that they acquired, and that would pay the debt service on those acquisitions. That's not happening.

People are getting cut by companies desperate to reduce costs. That's an indication that those companies are NOT in "GREAT shape", and stock prices reflect that fact.

 

[superset weekend]

Rox, your metric of measuring the value of a radio company is not quite correct. Enterprise Value is rarely used in the valuations of the radio industry. That is a generic key indicator. You also failed to mention the actual key stats you spoke of like revenue and free cash flow.

Of course companies are getting rid of people to cut costs, who is not doing that right now? Every company in America is cutting jobs. Even if you did use your example of EV, in the stats you did, most of the companies listed are ver positive. According to your stats, Citadel is worth 4 billion, Cox is worth 500 Mill, and so on.

Tell me one major radio company that has gone bankrupt. Even in this challenging environment, it has not happened. It MAY happen in 2009, to some of the weaker companies, but it will be the exeption, not the rule. Even if you move off Wall st and onto Main st, smaller, locally owned stations are still doing fine. Will some go bankrupt? Of course, but not the majority. Radio is strong. You can deny that, but thats all you can do! The stock market has taken a 40% hit this year, not many industires are happy about that. Radio revenues are not down 40%. Maybe 4%, but not 40.

 

[SirRoxalot]

Supe, you're confused. First of all, Enterprise Value is "what the company is worth". It's what you'd pay if you bought the company today, assumed all its debts, and got all its assets and cash.

Citadel is worth 2.14-Billion, and has 2.10-Billion in debt. In other words, the company is worth 2.14-Billion dollars, and their equity is worth .04-Billion dollars. The banks own the other 2.10-Billion in company value. Citadel's last closing price was 19-cents a share. Their latest quarterly revenue statement showed an 11% decline from last year. Anybody want to predict the 4th quarter this year?

Cox is worth 913.76-Million, and has 420.53-Million in debt. Cox owns more of the company than the banks do. Cox closed at $5.87. Their latest quarterly revenue statement showed a drop of 6.20%.

Regent is worth 191.91-Million, and has 189.51-Million in debt. Regent has about 2.4-million in equity. Their latest closing price was 10-cents.

I don't know where you got your -4% revenue figure from, but it's MUCH worse than that. YTD radio revenue according to the RAB was down 7% through the end of the 3rd quarter. The RAB reports monthly radio revenue compared to last year as follows:

September: -8%
October: -10%
November: -20%

Radio stock prices are down MUCH more than 40% for the year, so radio as an industry is doing much worse than the stock market in general.

Take a look at radio company value, and how they're leveraged, and you'll get an idea why the stock price is where it's at. Radio companies never owned so many radio stations before, and were never as highly leveraged before. Radio companies in the past were able to avoid bankruptcy by selling off stations that had grown in value. That's not the case anymore. If Citadel sold off stations, they wouldn't make enough money to pay off the debt on those stations.

Most groups have written down the value of their stations, which is a major reason that their earnings are in the negative numbers. The real problem is that revenues are shrinking when they planned on revenue increasing. In Buffalo, we have two groups in serious trouble. Does that mean that radio stations will fold? No, but it does mean that desperate companies are likely to take desperate measures.

Every indication is that 2009 is going to get uglier, for both radio people and listeners.

 

[JohnGault]

What a difference a year makes.

I think Roxalot is hittin every nail on the head here.

Superset I don't know what Nog or Kool Aid you been guzzlin, but the situation is much more dire than you realize.

Reason we haven't seen bankruptcy yet? Banks don't want to own radio stations, they know they'd get KILLED liquidating them. They have no choice but to renegotiate based on cash flow opportunities, and radio groups have no choice but to dump overhead.

When WIFI in the car happens it's over. Until then more of the same. This would have happened with or without the Wall Street collapse, it was already happening in slow motion.

 

[bobn]

Blaming the wrong corporate office

Radio and TV sales are down this year because cars sales and retail sales are down - Rox you say radio was down 20% in November - Well Buffalo new car sales were down 59% !! That's a real number.

Yes, people are losing their jobs in radio. But Bank of America just announced 10,000 layoffs over the next 3 years. Google is laying off ! Pepsi is laying off.

To blame 'corporate' radio for these layoffs is silly... TV and Radio..like everyone else...is trying to survive the worst economic downturn of our lifetime. It's not radio or tv...and you folks must work as janitor if you don't see it in your business.

I blame Rush, Bauerle, and Bob Lonsberry....not the Mays family and Farid.

It's The Economy...stupid.

 

[SirRoxalot]

Stupid Is as Stupid Does

Actually, I said radio nationwide was down 20% in November. I don't know what the local numbers are.

The auto industry has been mismanaged - both on the corporate and the union side - for years. They've created their own nightmare. Radio's downturn has been going on a lot longer than the general economy, yet the consolidators continued to pay 15 times cash flow for stations, using borrowed money and little equity. You'd think that they might have noticed that revenues WEREN'T increasing when they promised the banks that they could cut costs and increase income. I won't even throw in the IBOC fiasco, which has flushed millions into oblivion.

The Mays family is actually sitting in pretty good shape. Clear Channel sold their TV channels for a serious chunk of change, and sold off a bunch of small market stations before the bottom fell out of the market. They took the company private with a lot less debt than most groups right now.

I ABSOLUTELY blame Farid for Citadel's "purchase" of the ABC stations. His EGO led him to seriously overpay for admission to the Big Market Club, and those are the stations that are KILLING Citadel right now. Medium markets like Buffalo and Albuquerque are being sucked dry to support the debt service on the ABC purchase.

Regent almost lost control of its board of directors over the Buffalo purchase. CBS extracted a princely price - $125-Million - for the Buffalo cluster. That's a big chunk of their $189.51-Million in debt. Buffalo is their largest market by a significant margin.

There's plenty of stupidity to go around when it comes to causes of the current economic downturn, but radio consolidators sold nearly as big a myth as Bernie Madoff. The idea that they could create "economies of scale" to cut costs, and "regional synergies" to push up rates, looks laughable now. The bottom line is that many of these corporations borrowed far too much money in their quest to create defacto monopolies in certain demographics and/or certain markets. They figured that they always had an "out" by selling off stations to other consolidators for more than they paid for them. Well, station values are declining to more realistic levels, and that whole Ponzi scheme is crumbling before our eyes.

 

[Element9]

Regent almost lost control of its board of directors over the Buffalo purchase. CBS extracted a princely price - $125-Million - for the Buffalo cluster. That's a big chunk of their $189.51-Million in debt. Buffalo is their largest market by a significant margin.

Speaking of Regent:

CBS Radio Monday morning (Dec. 22) announced it has signed a definitive agreement to sell three of its station in Denver -- country KWLI, hot AC KIMN and classic hits KXKL -- to Wilks Broadcasting for $19.5 million in cash.

Wilks gets three FMs (2 - 100kW, 1 - 50 kW) in Arbitron Market #22 for $19.5 million.
Regent paid $125 million for four FMs and a 1 kW AM in market #52. Did Regent get taken?

There's plenty of stupidity to go around when it comes to causes of the current economic downturn, but radio consolidators sold nearly as big a myth as Bernie Madoff. The idea that they could create "economies of scale" to cut costs, and "regional synergies" to push up rates, looks laughable now.

It looked laughable in the Roaring 90s when the mantra was, "Eat or be eaten" and hundreds of small, stable, highly liquid owner-operators sold out to Evergreen before it sold out to whomever; Clear Channel, Cox, Cumulus, Citadel and Entercom.

The bottom line is that many of these corporations borrowed far too much money in their quest to create defacto monopolies in certain demographics and/or certain markets. They figured that they always had an "out" by selling off stations to other consolidators for more than they paid for them. Well, station values are declining to more realistic levels, and that whole Ponzi scheme is crumbling before our eyes.

It's not only Arthur Madoff who's to blame. And he certainly is to blame. But "The Great American Ponzi Scheme" is taking it's toll on just about every business in the United States, from housing to durable goods, from retail to automotive. Retail is wringing its hands these days, looking at a Christmas season that appears to be the softest in decades.

It may be that America has come to its senses. A country that has a per household savings rate in negative numbers finally understands there's a major problem and a genuine need to go cold turkey when it comes to millions of Americans who flash their plastic whenever they want to buy something, especially something they couldn't really afford and really didn't need.

Sorry to say, 2009 may turn out to be the Year of Bankruptcy: Personal and Corporate.

You wonder how much more cutting is on the way in the Buffalo clusters? You'd hope the worst is past, but would it surprise anybody to see FMs going with absolute skeleton staffs. Open R&R and see a dozen pages of "Pros On The Loose." Look at the names in those pages and you can see lives being shattered.

No platinum or golden parachutes there. No sir. "Brother can you spare a dime."1

_________________________________________________

BTW, for the newbees who may not get that line1, Google it and read about one of the darkest economic times in our country's history.

 

[superset weekend]

Rox, you asked where i get my info, like i am misinformed. I am IN the industry, not USED to be. I am very informed. Radio revenues were not down 20% in Nov. Atleast not here in WNY. They maybe somewhere, but not here.

There are three basic valuations of measuring broadcast industry worth. Multiple of Cash Flow, Multiple of Revenue, and discounted cash flow analysis. Radio is not doing great, but it is doing fine. Many other industries are not doing fine.

As far as the bankruptcy issue. Banks do not decide who gets bankrupt, the goverment does. Very few compaines, and no major broadcast companies that i can think of have filed for bankruptcy. They are reorganizing in other ways, like expense cutting. Radio gets about 10% off all revenue share right now, as always has. There is alot of revenue growth opportunity with the decline of other media, like print. Radio is poised to garner more, especially with an emphasis on digital elements.

You guys can keep croaking doom for radio, but it ain't happening. Like the real estate market, radio has lost percieved value because of inflated prices over the past few years. The station prices will come back to reality, the value will be back, the programming will be fine, and the cash flow will continue.

Please try to look at the glass half full sometimes, it will help.

 

[superset weekend]

This is in reply to bobn and john Gault. Bob, great points. You are getting what i am saying. This is a bad econmic downturn. Just look at the blue chip companies and see what is happening to jobs. In the WNY market, radio has lasid off about 10 people that i can think of this year. That of course is not good, becuase they are our fellow friends, and great broadcasters. It is not personal, just business, like every other business. Other companies are laying off tens of thousands!! Give radio a break!

To JOhn Gault, very good point. We are REALLY in for a challenge when internet is in the cars. THAT is going to be interesting. Especially knowing that anyone with a computer and some sofware can bulid a radio station without the overhead of studios, antennea, debt service, etc. That is a little concerning, even for me. My soulution goes back to grassroots. Product, and community. Simple as that, we have got to have great brands and we have to market them agressivley.

 

[Steven21]

You wonder how much more cutting is on the way in the Buffalo clusters? You'd hope the worst is past, but would it surprise anybody to see FMs going with absolute skeleton staffs.

I really DO wonder.

Hope much more a diminishing of the on-air product can this industry take?

Is it reasonable for a company (that's trying to save money) to systematically destroy the quality of their product?

This sounds like a slow and painful suicide.

Air people are overhead to radio the way good ingredients are overhead to a company making spaghetti sauce.

Laying off office staff is one thing (whether it is radio or non-radio), but once you start impacting the quality of what you expect people to purchase (or listen to), you are losing sight of the big picture.

If there was EVER a time when radio CANNOT afford to cheapen it's product, it's NOW.

Of course that means this is EXACTLY what they'll do.

Has there ever been a more poorly thought out and/or self-hating business than this one?

**PS-Anyone who mentions IBOC or HD in a positive light should be forever drummed out of this business for lack of common sense and for having a dangerously loose grasp of reality.

 

[superset weekend]

Cutting live on air positions is not always a bad thing for local radio. There is some live programming, jocks, music, elements, etc that deserves to be cut. MANY syndicated shows and automomated programming features do very well for programming. People have got to stop thinking that this is 1975 radio. The overall environment then was much different. Less competition mostly, plus stations were competitive with each other. Now, the cluster effect has taken over. I am not necessarily a fan of this, but it is, the way it is.

If the question is will radio continue to make money in 2009, the answer is yes. If the question is will more people listen to radio in 2009, i believe the answer may be no. Radio then, will win by default, because it is a business first. For the time being, local and national advertisers still trust radio, and still spend money in it. Does radio deserve it? Maybe yes, and maybe no.

 

[NeedsMoreCowbell]

Superset,

I respect your efforts to get this board to look at the glass half-full, but I gave up long ago. Unless you want to reminisce about radio from the 70s, or talk about how awful HD radio is, you'll always be a voice in the wilderness here. Surely you see that those of us actually working in the industry are contributing to society's decline?

God help us all.

Now let's get back to dissecting those 12+ numbers!

 

[SirRoxalot]

Management Propaganda?

Cutting live on air positions is not always a bad thing for local radio. There is some live programming, jocks, music, elements, etc that deserves to be cut. MANY syndicated shows and automomated programming features do very well for programming. People have got to stop thinking that this is 1975 radio. The overall environment then was much different. Less competition mostly, plus stations were competitive with each other. Now, the cluster effect has taken over. I am not necessarily a fan of this, but it is, the way it is.

If the question is will radio continue to make money in 2009, the answer is yes. If the question is will more people listen to radio in 2009, i believe the answer may be no. Radio then, will win by default, because it is a business first. For the time being, local and national advertisers still trust radio, and still spend money in it. Does radio deserve it? Maybe yes, and maybe no.

Programming cost cuts will lead to fewer listeners, but radio "will continue to make money in 2009"?

"For the time being, local and national advertisers still trust radio, and still spend money in it."?

Man, you need to put your glasses ON. Fewer listeners, quite simply, means less revenue. Advertisers pay based on the number of listeners. Secondly, there's a HUGE drop in advertising budgets on both the national and local level. The odds that radio will continue to get the same amount of revenue is laughable. On the national level, national advertising was off 11% through the first 3 quarters. The 4th quarter was looking pretty ugly, with national off 24% in November. Anybody hopeful that December numbers are going to be better?

Syndication is a short term band-aid for a serious hemorrhage. How long before the syndicators decide that the radio distribution model isn't cost-effective, and that they can make more money on pre-packaged shows by simply making them available via the Internet - either streaming or by podcast? All radio is doing is building an audience for those shows - just as they did for Howard Stern, Rush Limbaugh, and others. Radio is conditioning people to not expect immediacy or local content - two of its biggest strengths.

The "geniuses" at corporate have overpaid for radio stations, and are now up against it because they have a mountain of debt to pay off. They're going to try to cut expenses, but they can't cut nearly enough to offset revenue decreases. It's too bad that nobody paid any attention to a little concept called "the business cycle" when they overextended themselves in a mad rush toward consolidation.

The "cluster" effect has indeed taken over, and we - both as people in the business AND as listeners - are getting the second half of that expression.