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A question for station owners about station ownership

I

icstephen

This is a question for station owners or anyone that has owned a station, I want to be one of you but I have allot of questions...the first being is it even worth it in the current age of radio? If I do buy a station it would be a small or small medium market with money being the major hurdle. I have worked in radio off and on and have had a passion for it ever since I was about 5 or 6 when a friend of our family took us on a tour of his station. I want to proceed but don’t really know where to begin so any suggestions on how to start... what to watch out for (pitfalls),

1) How difficult is it to acquire funding? Are there any alternatives to the bank?
2) Best ways to find stations for sale (I have looked at some of the brokerage sites)?
3) I would think I would need an attorney but what about an accountant? Would it be better to find them on my own or let the broker take care of that?

Making the deal

4) When I get financing and I start looking for a station is there any thing I should be careful of?
5) How long does it take to make the deal (transaction time/dealing with the FCC)?
6) I've bought the station now what - dealing with employees/VT/syndicators? My main question here is that I really don’t want to run allot of automation but if the station is using voice trackers or satellite service am I stuck with it/them until the contract runs out or can I dump them? Is that something that has to be in the sales contract?
7) Paying royalties...I have been reading about the RIAA's push to get stations to pay royalties, how will this affect profit? Also how expensive are ascap/bmi fee's (I know this may be a station by station basis but it is an added cost)?
7A) I'm sure there are hidden costs that the novice owner would not realize, anything to look for (license renewal costs, arbitron, etc)?

I'm sure that any answers I get will generate more questions but these are my main concerns at this point, I am very serious about this but not knowing if it is even doable, I know that prices have really taken off in the consolidation era and I know it prices allot of people out so I don't know if owning a station is even possible but until I know the ins & outs of buying a station I'm not able to make an accurate decision.

If you know of any websites or books that will help in my decision please post them as well.

Thanks
 
Hi Steve,

It sounds like you and I have, or gave had, very similar dreams in regards to station ownership. I
was seriously looking at a station back in the late 90s but decided against it during "due diligence."
I'll share as much as I know and hopefully some owners will chime in.

I think that the prices of stations are way out of hand in many places. In Tallahassee, Fla., the cheapest
AM is around $350-400k and that's basically for a license only. 350k for a station that has no billing and no revenue does not seem right to me. The billing is literally 0, but the owner gets money from a tower lease and now an LMA. Paying the asking price with no business on the books, no property asociated with it, a tower that's got to be moved within a year..you'd need to be a millionaire..and in its heydey this station only billed around $10k a month. You'd never get your money back.

When I was looking, I found that getting funding was very difficult. I had saved enough to make a down payment but didn't really have enough to operate on as well.

As far as finding stations for sale, you can try brokerage sites..or if you are looking at a particular market or station, you might try contacting the owner directly. I found the mom-and-pop stations owners more
willing to talk..but sometimes very picky about who they sell to.

You definitely need an attorney well-versed in FCC regulations.

Due diligence involves a physical inspection of the facility - everything. If the tower is rusted and about to fall, you want to know it before you sign anything. Some business records, any FCC penalties, the public file..
you really will want to do your homework.

In the station I was investigating, I discovered:
No EAS unit
Roof was falling in and leaking in the transmitter building
Studio building was delapidated and needed replacing
Transmitter was old and service by manufacturer (Harris) was being discontinued..unit deemed obsolete

But..the kicker was, I did not feel like I could totally trust the licensee. So I walked away from it.

It takes a few months for deals to go through, depending on how complex the deal is. Anywhere from 3 to 9 months would be normal.

There are lots of costs..ASCAP/BMI/SESAC are based on station revenue..no RIAA YET..but their eyes are on the big prize..terrestrial radio. There are license renewal fees, electric bills, repair bills, and it just goes on and on..

Steve, I think it is very sad that owning a station is beyond the reach of most Americans. I don't know what
or if there is a solution to this.

Very best of luck to you.
 
I've owned my own station for almost 25 years. Assigned the class A channel to a small county seat, built it from scratch with a college buddy, added an AM, upgraded to a B-1, added another Class A in a nearby county, sold the AM, sold the B-1 station, then had the buyer fail to close, had my business partner retire, and sell out to another former owner from the same market.

Had the advantage of being both an attorney and holding a 1st phone since the 60's.

That said, the current multiple ownership regs actively discourage new entrants in the business. and encourage concentration of ownership.

We've been looking for another station to buy in the area, but prices are too high, even if there was anything to buy.

Now to your questions, assuming you can find something to buy:

1. Financing. Be prepared to use family sources or bring in other investors.

2. Due-diligence: Local attorney helpful to check for liens, both on real property and on personal property, this can be checked without the need to contact the station. You can find a good history of the station's applications and licenses on the FCC website with some looking into their databases. Then drive into the town (if you aren't already familiar with it) and bring along a portable radio. See what the signal is like where the people live. Check into a local motel, and make a list of who they have on. Listen to the local competitors, and see who they have one. Who are the big car dealers? Local furniture stores? Are they on?


3. Then you can open negotiations. See what the place looks like, bring in a contract engineer if you are not sure what you are looking at on the technical side. How much staff? Who sells for the place? Not a good sign if the owner boasts of the money he is getting from Google, especially if you hear per-inquiry in mid afternoon.
 
For financing, you might want to check out Wells Fargo Bank either their Foothill or Commercial division. They understand and have experience with media properties.

https://www.wellsfargo.com/com/industry/communications

Don't be put off by the 10 million to 500 million loan range, they will do six figure loans.

As for the media broker websites, I've actually looked at a couple of advertised stations. As expected, the stations were financially distressed, to put it mildly. Maybe they could have been revived to profitability but, in the end, I asked myself, "Do I want to spend six figures buying a sick animal the owners have obviously given up on?"

With both Wall Street and ad agencies devaluing radio, these are strange days for the medium. Who knows if it will improve but I definitely think it's a buyer's market for radio stations. So is it a good time to buy? Perhaps.

db
 
As a hobby , not a business. Especially if you can find an abandoned, off-shore drilling rig with good internet connections so you can escape the RIAA
 
Let me amend one point I mentioned earlier.

When I stated that Wells Fargo Bank's Commercial division will make a six-figure loan on a radio station, they actually do this through their SBA program. So you will need to fill out the paperwork required by the SBA. But the bank will walk you through the process and, as I said, they do understand the media business and can work with you and the SBA in acquiring a radio property.

db
 
Steve,

Just to add my two cents, before you worry about finding the station, an attorney, financing, format, etc.....If you don't already know, you should learn as much as you can about...and I mean 1st hand experience...at sales. No one will even consider loaning you money unless they feel extremely assured that you can give them a return on their investment, which boils down to YOU AND YOUR ABILITY TO MAKE AN OPERATING BUDGET WITH ENOUGH LEFT OVER TO PAY BACK THE LOAN. Talk to any funding company and this will be paramount.....your keen knowledge and ability in sales and management cannot be stressed enough. Radio is a very competitive business and operators must be very sales and business savy.

In addition, they will also be most interested in the financial equity you bring to the table to invest as well. They will want you to be vested with your own equity into the project so that if the operation goes south, you don't walk away leaving them hanging.
 
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