92.3 Now's fall

[davideduardo]

Clear Channel and Cumulus are both quick to flip formats, at least in Atlanta, and neither corporation is even close to being "in dire financial straits"

That is funny. If it weren't for the thousands of people, including many friends, who work for each of these companies, it would be even funnier.

What you're basically saying, I think, is that New York City has such a large population that CBS should be content with the billing that they have, since coming in 20th in New York is more profitable than, say, coming in 1st in Providence, for example - so then, according to what you're saying, extremely large cities should have very few format flips, relative to medium-sized cities - I'm not sure if that's true on not...it's just the first time I've heard that in the couple years I've been on this board

What I am saying is that profitability is a powerful deterrent to change. And in New York City, the second largest revenue market, there is enough available billing to sustain stations in the lower tiers and to keep them profitable.

In Fargo, where the whole market bills about 1/3 of the billing of the single highest billing New York station, it is a harder task to live with lower ratings and lower billing. But the smaller markets have a lot less agency based transactional business, so in some cases low listenership stations can do OK despite it all.

If you look at format changes in the top 10 markets (and those 10 MSAs represent nearly 30% of all the country's radio revenue) you can see that they tend to come following a sale or when it's obvious that the station is losing money.

In the first case, a buyer may acquire a station with a specific format in mind. ESPN comes to mind... they are willing to blow up existing revenue streams to fulfill a desire to be on a facility in a particular market.

In the second case, a company has a station that is losing money and shows no growth potential. They try something new. Or a station is not doing well, and there is a bigger need from a cluster perspective... such as protecting WSB with an FM.

Taking a continuously owned station that is producing good cash flow and wiping out the billings, incurring startup costs and having no guarantee is not a good idea in this 30%-lower-revenue-than-in-2007 world of radio. There is far less margin for error, and that scares most people.

 

[chrocket87]

What I am saying is that appearances can be deceiving. A company with fully paid assets and good cash flows is not going to be as likely to have their finger on the trigger as one that is in dire financial straits.

I agree with most of what you're posting, except that Clear Channel and Cumulus are both quick to flip formats, at least in Atlanta, and neither corporation is even close to being "in dire financial straits" - if either one had ownership of Now 92.3, I am convinced they would have flipped it by now to a more profitable format

Check the financial statements of CC and Cumulus and you'll see a different story. For example, both companies have reported huge losses in 2012, including a $400 million loss for CC. Sure, the economy has left stations with drastically lower sales, but with the debt obligations both companies face (Cumulus has a debt-equity ratio of just under 1 and CC has a ratio of over 1.5), those two companies need a way to pay off their creditors when they want their money. That's why those two companies are quick to pull the trigger on format flips-they have to bill as much as possible for when their debts are due. CBS, OTOH, is nowhere near as leveraged as the other two and has seen robust profits over the past few years.

This allows CBS to take their time on developments, so they can be more patient than CC and Cumulus. Besides, CHR in NYC obviously has a large upside potential (after all, Z and KTU are billing extremely well), so as long as they are at least turning a profit with Now, they can make tweaks as they see fit and hope to gain a larger slice of that pie in time, since there's obviously a ton of money to be made in that format and we don't know the income potential for Alternative in the NYC market (barring Stern). If you're turning a profit, wouldn't you rather be satisfied with that profit and craft yourself to make more profit as time goes on or take a chance on a format that could explode in your face and cost you millions?

Note: All income statement/balance sheet data is provided by Yahoo Finance.

 

[atlantaboy]

What I am saying is that appearances can be deceiving. A company with fully paid assets and good cash flows is not going to be as likely to have their finger on the trigger as one that is in dire financial straits.

I agree with most of what you're posting, except that Clear Channel and Cumulus are both quick to flip formats, at least in Atlanta, and neither corporation is even close to being "in dire financial straits" - if either one had ownership of Now 92.3, I am convinced they would have flipped it by now to a more profitable format

Check the financial statements of CC and Cumulus and you'll see a different story. For example, both companies have reported huge losses in 2012, including a $400 million loss for CC. Sure, the economy has left stations with drastically lower sales, but with the debt obligations both companies face (Cumulus has a debt-equity ratio of just under 1 and CC has a ratio of over 1.5), those two companies need a way to pay off their creditors when they want their money. That's why those two companies are quick to pull the trigger on format flips-they have to bill as much as possible for when their debts are due. CBS, OTOH, is nowhere near as leveraged as the other two and has seen robust profits over the past few years.

This allows CBS to take their time on developments, so they can be more patient than CC and Cumulus.

Thanks for explaining it (I had no idea) - Does CBS radio share its finances with CBS -TV? Clear Channel clearly has much higher-rated radio stations, on average, so I'm assuming we're comparing CC Radio to the entire CBS media corporation

 

[atlantaboy]

^Now that I looked it up, that's a pretty misleading statistic

CBS is profitable because of their television stations - CBS Radio, in and of itself, probably shows a loss far worse than Clear Channel or Cumulus

As far as Now 92.3 tweaking itself, they've been trying for years, and ratings have been consistently near or at the bottom - but apparently because CBS makes so much money off their television stations, they aren't feeling the same financial pressure that CC and Cumulus are, so it's better to leave well enough alone - besides, they obviously made a horrible mistake with 92.9 in Atlanta, so they don't want to risk making another one in a large market

 

[reelyreal]

Clear Channel has more radio stations, period. You can't really compare "who has more highly rated stations." That's why they've got more debt than is possibly imaginable.

CBS' divisions all report separately. Outdoor, Television, TV O&O's, Radio, Interactive, Publishing, and CBS Studios are all in their own little worlds that contribute to the overall company.

CBS Radio's revenue was up 1% last quarter and has seen steady growth. The division is profitable.

 

[davideduardo]

^Now that I looked it up, that's a pretty misleading statistic

CBS is profitable because of their television stations - CBS Radio, in and of itself, probably shows a loss far worse than Clear Channel or Cumulus

CBS radio is immensely profitable. You can see this plainly in the 10-K reports. And the investor calls make mention of radio's revenues and profits. Look under the "Local Broadcasting" division, for which separate stats are available.

In 2102, the New York market had $580 million in total billings. CBS had $192 million in revenues, or just about one-third of all market revenue.

Local Broadcasting made 20% of CBS's total revenue, but 28% of its profits in 2012.

A quote: "Aggregate total revenues for the Company’s radio stations for 2012 were ranked #1 or #2 in four of
the top five U.S. markets by metro area population (New York, Los Angeles, Chicago, and San Francisco),
according to the 2012 Market Total Revenues Performance Summary of Miller, Kaplan, Arase & Co., LLP."

Suggesting that CBS is not profitable goes beyond absurd.

 

[chrocket87]

^Now that I looked it up, that's a pretty misleading statistic

CBS is profitable because of their television stations - CBS Radio, in and of itself, probably shows a loss far worse than Clear Channel or Cumulus

While I have no idea about CBS Radio's financial information, though that division may be in the company's 10-K (You can look that up, I'm not digging through it, lol), CBS is more stable because of the diversified revenue streams. If the radio is not profitable, they can be more patient because the revenue stream for the TV division is pretty high. Cumulus and CC obviously do not generate enough income from their other streams to prop up their radio operations, hence why their situation is more dire than that of CBS.

reallyreal has a great point here, and I think the fact that CBS owns less stations could be another reason why it is in better financial health. Remember, Cumulus and CC have gone on spending sprees in the past 15 years or so to get to their size and a lot of that was financed with debt. Well, when billing tanked during the recession, CC and Cumulus had no way to pay for all of the stations they had picked up. CBS has sold off many of its smaller markets (and rumor has it they are trying to sell off several more), so if markets were not generating as much profit for the company, rather than taking losses when revenues dropped, CBS got rid of them. IIRC, when CBS picked up RXP 2.0 to give WFAN an FM home, it paid cash for the station and if I learned anything from the personal finance course I took in college, it's that it's better to pay for things using cash than with credit and the current radio situation is a perfect reason why.

 

[atlantaboy]

You can't really compare "who has more highly rated stations."

If you look in Arbitron under "Market Share By Owner," Clear Channel is ahead of CBS in every single Top 10 market

The post above mine explains a lot, though IMO

 

[davideduardo]

As far as Now 92.3 tweaking itself, they've been trying for years, and ratings have been consistently near or at the bottom - but apparently because CBS makes so much money off their television stations, they aren't feeling the same financial pressure that CC and Cumulus are, so it's better to leave well enough alone - besides, they obviously made a horrible mistake with 92.9 in Atlanta, so they don't want to risk making another one in a large market

Now, at $14 million in revenues, is likely cash flowing (EBITDA) about $6 million, give or take a million. My best guess would be on the high side, but that depends on how they allocate shared cluster expenses and other accounting procedures.

All companies make a few mistakes from time to time, just as all humans do. We fix them, and move on. CBS has the advantage of having nearly all its stations in Top 25 markets where there is more revenue and margins can run as high as 60% on a music station.

And the 92.9 move in Atlanta makes total sense. Since CBS has only two FMs in the market (and a very limited AM) there is no cluster synergy to be had. But the new CBS sports initiative, coupled with enormous sales and ratings success with sports in places like NY and Detroit, having a prime CBS Sports operation in market 9 is a smart long term move.

 

[atlantaboy]

And the 92.9 move in Atlanta makes total sense. Since CBS has only two FMs in the market (and a very limited AM) there is no cluster synergy to be had. But the new CBS sports initiative, coupled with enormous sales and ratings success with sports in places like NY and Detroit, having a prime CBS Sports operation in market 9 is a smart long term move.

Except that Atlanta isn't NY or Detroit - Sports, like every other format, is more popular in some markets than in others, and ATL doesn't have the kind of competitive sports craze that a lot of Northern cities do

92.9 has now been on air since last October, and ratings are down to 0.6 - if CBS has the sense to realize that Country and Alternative don't work well in New York, they should have the sense to realize that Sports isn't going to do well in some markets either

But, again, if they have a lot of revenue coming in from their TV outlets (which they do), it's probably a wiser move to wait out the low ratings rather than having to cut people's contracts

 

[davideduardo]

You can't really compare "who has more highly rated stations."

If you look in Arbitron under "Market Share By Owner," Clear Channel is ahead of CBS in every single Top 10 market

The post above mine explains a lot, though IMO

Radio is not a horse race. There can be multiple winners. In many cases, being #1 in ratings is not a guarantee of being #1 in profits.

Overall, CBS has many profitable stations in the highest billing markets, while CC has many marginal stations in larger markets and lots of stations in small razor-thin billing markets.

Advertisers don't buy "highly rated clusters" because they perform CPP analysis on each station in a buy. So the important thing is the performance of each station, then the cluster performance.

Obviously, you can't compare groups that have unequal numbers of stations in their individual market clusters, either.

In 2012, CC had $2.6 billion in revenue from 847 stations. CBS had $1.4 billion in revenue on 130 stations. Who has the higher revenue per station? Who has the probability of having the higher margins?

 

[davideduardo]

And the 92.9 move in Atlanta makes total sense. Since CBS has only two FMs in the market (and a very limited AM) there is no cluster synergy to be had. But the new CBS sports initiative, coupled with enormous sales and ratings success with sports in places like NY and Detroit, having a prime CBS Sports operation in market 9 is a smart long term move.

Except that Atlanta isn't NY or Detroit - Sports, like every other format, is more popular in some markets than in others, and ATL doesn't have the kind of competitive sports craze that a lot of Northern cities do

92.9 has now been on air since last October, and ratings are down to 0.6 - if CBS has the sense to realize that Country and Alternative don't work well in New York, they should have the sense to realize that Sports isn't going to do well in some markets either

But, again, if they have a lot of revenue coming in from their TV outlets (which they do), it's probably a wiser move to wait out the low ratings rather than having to cut people's contracts

You are missing the point of the sales synergy with the nationwide CBS sports operation that has just been launched. They need a presence in the Top 10 markets, and having Atlanta in the fold enhances revenue in all the markets.

Ratings are not the only driver of revenue, and 12+ or 6+ ratings don't drive anything except idle speculation on these boards.

 

[atlantaboy]

Overall, CBS has many profitable stations in the highest billing markets, while CC has many marginal stations in larger markets

That statement is pretty misleading - Clear Channel also has many profitable stations in the highest billing markets, probably more than CBS does, and CBS has many "marginal stations" in larger markets

The part about CC losing money on so many of their small-market stations might make sense, though

I can't even begin to imagine how much money CBS makes off Two And A Half Men, The Big Bang Theory, How I Met Your Mother, etc. - you can't possibly compare their financial situation to Clear Channel

 

[Jeffrey]

NOW referred to themselves as the party station several times this week.
I don't hear an increase in EDM but they certainly seem to be billing themselves as rhythm friendly.. and with an increase in mix shows.
With some tweaking NOW is very well positioned to eat away at CC's Z and KTU.

 

[GooberVision]

With some tweaking NOW is very well positioned to eat away at CC's Z and KTU.

No, they are not :

 

[TonySantiago]

NOW referred to themselves as the party station several times this week.
I don't hear an increase in EDM but they certainly seem to be billing themselves as rhythm friendly.. and with an increase in mix shows.
With some tweaking NOW is very well positioned to eat away at CC's Z and KTU.

I gotta agree with Goobervision on that one.

For those of us that like more of today's sounds, especially in regards to EDM, we're already listening to Now. And like I've said in the past, I have no problems with the mix shows. It still, IMHO, is about the REST of the day and how it sounds. The character has completely changed and it's that feel, which I think is why Now is having deeper issues.

Even if you CHANGE format and made Now the EDM station of New York but keep the same character there, I really don't think the numbers would rise and if they do, it won't be dramatic. Not because of ELECTRONIC DANCE MUSIC (because someone WILL say it, that's just "modus operandi" here...cue XCountry285 ) but because of the character of the station. Granted you're not going to bring back Tic-Tack, Nick Cannon or Chunky but something has to give....somewhere.

Once again, this is ALL JUST AN OPINION.

 

[wabc860]

It is very possible if 92.3 FM keeps dropping WINS moves over here and the CBS sports network starts up in New York on 1010 AM.

 

[hubcity]

It is very possible if 92.3 FM keeps dropping WINS moves over here and the CBS sports network starts up in New York on 1010 AM.

Heh, maybe they'll actually say "We'll be back with more music...after the news" this time.

 

[ty_kleinle]

Why don't they just go already? How did CBS think they could actually take the audience of TWO well-performing CHR stations. Oh sorry, it's "Rhythmic CHR" soooo different than Z100 and KTU. All three play the same songs every two hours, just check out their play list. Drop NOW for Rock, Sports, ANYTHING!

 

[Jeffrey]

NOW referred to themselves as the party station several times this week.
I don't hear an increase in EDM but they certainly seem to be billing themselves as rhythm friendly.. and with an increase in mix shows.
With some tweaking NOW is very well positioned to eat away at CC's Z and KTU.

I gotta agree with Goobervision on that one.

For those of us that like more of today's sounds, especially in regards to EDM, we're already listening to Now. And like I've said in the past, I have no problems with the mix shows. It still, IMHO, is about the REST of the day and how it sounds. The character has completely changed and it's that feel, which I think is why Now is having deeper issues.

Even if you CHANGE format and made Now the EDM station of New York but keep the same character there, I really don't think the numbers would rise and if they do, it won't be dramatic. Not because of ELECTRONIC DANCE MUSIC (because someone WILL say it, that's just "modus operandi" here...cue XCountry285 ) but because of the character of the station. Granted you're not going to bring back Tic-Tack, Nick Cannon or Chunky but something has to give....somewhere.

Once again, this is ALL JUST AN OPINION.

When I said "tweaking" I didn't mean just the music. It's clear that CBS needs to make some investments in the station but musically it can be well positioned to compete with Clear Channel's WHTZ and WKTU, infact I think it already is. The character and vibe of NOW is definitely smaller market and weak...we all agree on that. I believe that's why the ratings are dismal and not for the music. I don't think that NOW ever sounded that great. Chunky, Tic-tak and Nick Cannon weren't exactly top entertainment.
EDM or not I use once again CBS's KAMP in LA. They signed on around the same time as NOW and look how they perform.
CBS obviously invested alot more on KAMP.