Arcade Fire and Indie music

[davideduardo]

David,

The CC JSA lasted a year and a half.

Indie lasted 5 years.

So the station was profitable to Entravision in the 3.5 years after the JSA, until the economy fell and ad revenue dropped below an acceptable level.

Yes, that's public knowledge. The JSA was what achieved visibility and credibility for a station that, on its own, could not get in the door of most agencies. And that is what attracted some management talent that was able to sustain the station after the end of the JSA (although they had a lower level JSA for part of the remaining time, too).

The economy really collapsed in Q3 of '08, and fell the most in Q4 of '08 and Q1 of '09. By the time it was realized that we had more than a repeat of the '02-'03 recession (big drop in the markets, no drop in radio revenue), the PPM reports had been out since early August and it could be seen that Indie was definitely massacred by the reality of the PPM.

The issue, in short, is that adjusted for the PPM and the decline in market revenues, the station would be billing about $1.6 million today... less than what Gato does now.

 

[Buckethead]

All true. Though all formats are in a state of flux and not fixed.
I believe that given more than a couple of months Indie would have changed enough to work with PPM.
It just had everything stacked against it at that time, including as somebody pointed out a market GM who wanted that property back making him money.

 

[RBB05]

Very true RBB05, on all accounts.
However I don't think it was the margin issue as much as it was a need to
severe some overhead so that they could report that back to the shareholders.
They were falling below a dollar and desperate to do anything to bring the stock price back up so getting the expenses (salaries) off the books was the most important issue.

A very short sighted move. They could be employing awhole lot of people and making the same margin but that would be bad for the stockholders meeting so it looks better to drop a large percentage of employees.

That's what radio has come down to in post-consolidation America.

Hopefully with some sell-off inevitable there will be some mavericks back in the game.

good point on the share price/stockholdert issue...it was also a few months before that when they sold their billboard company....the need to purge overhead was critical for their survival.

 

[RBB05]

Contrary to the numbers analysis, the drive to have Indie's signal be in Spanish was forged long before PPM declines and a recession. There was an internal battle at EVC with a few having their eyes set on the signal the minute they walked through the corporate doors. All they needed was 50 cents worth of justification.

First, Indie came about as part of a JSA with Clear Channel. New market cap rules including JSA's in a cluster ended this. The JSA had been very advantageous to the station(s), which had not been succesful as a simulcast with KSSE when it was on 97.5... and which was no longer needed when 107.1 went to Entravision.

Then, the manager who had kept the property billing at a decent level (everything considered) left.

Finally, the PPM killed Indie's audience. After 8 books, it was obvious what they had to do.

Entravision has a bunch of English language stations... and seems to have no issue with operating in English in those cases where it makes or made sense. The dance stations in Dallas and LA are examples of actually going into a less than mainstream format, in English. And the company does not have any trouble making format changes when needed...

Not sure what company you are thinking of.....EVC sold its Dallas stations about three years ago....after 4 management changes in 4 years, the company chose to wave the white flag instead of make corrections and compete. They have English language stations in insignificant markets such as McAllen and El paso. They also have one in Sacramento that has had 4 format "tweaks" in 5 years. The English stations are never even discussed on corporate calls because they are a non-factor in EVC's picture. The VP of programming for EVC is the VP of programming for ALL of EVC and he has no significant track record of English language success. He played no role in Indie's programming....the one who did was responsible for his own horrible decisions.

Indie did not have 8 PPM books....the PPM went live in October and Indie was killed end of the following January.

 

[RBB05]

However I don't think it was the margin issue as much as it was a need to
severe some overhead so that they could report that back to the shareholders.
They were falling below a dollar and desperate to do anything to bring the stock price back up so getting the expenses (salaries) off the books was the most important issue.

Shareholders are the owners of a company. And going below a buck a share for any period of time results in a stoc being delisted from the exchange it trades on... reducing the visibility and marketability of shares in the company, producing significant losses for the owners. So it is quite understandable that management would look to improving operating performance; in a deep recession that means cost cutting.

going below a buck a share for "any period of time" does not get you delisted. It has to be for 90 consecutive days. Then you get a letter which gives you 60 days to respond. During that period, if you go over a dollar a share on any day, you get a reset on the clock. In addition, because of the bad economy, media companies were being given exemptions by the NYSE and NASDAQ. SBS got one. EVC could have gotten one also....due to poor overall economic environment, the NYSE was being very flexible. Delisting was never a concern with the investors. The ownership/management of the company was being called into question by the 2-3 or three investment banks that even bothered with analysis of EVC. The company kept cutting to reduce overhead....but the issue....for any company...becomes that at some point you have nothing left to cut and you actually have to find a way to create revenue.....something EVC is not good at.

 

[davideduardo]

going below a buck a share for "any period of time" does not get you delisted.

Difference in language use. To me, a "period of time" in this context means "the amount of time each exchange sets for delisting to be considered and then become difinitive." Since different exchanges have different rules, I just said "any period" meaning "any of the different periods of time established by the exchange rules." If that was not clear, I appologize. I've been a day trader in a number of different periods in my life, and "betting" on listing/delisting's effects on shares can be very profitable.

It has to be for 90 consecutive days.

On some exchanges. My Bloomberg simple view of averages gives me 39 exchanges.

Delisting was never a concern with the investors.

Delisting is always a concern to investors, as delisting almost always causes share prices to drop and the spreads to expand and the volume to become very thin.

The ownership/management of the company was being called into question by the 2-3 or three investment banks that even bothered with analysis of EVC.

Investment banks keep their analysis fairly private. It's brokers, pension fund advisors or management companies, etc., who issue public recommendations. Bain Capital does not give out investment advice to the public, for example. (Again, I think you and I may be using the term "investment banks.")

The company kept cutting to reduce overhead....but the issue....for any company...becomes that at some point you have nothing left to cut and you actually have to find a way to create revenue.....something EVC is not good at.

The economy and the special things affecting terrestrial radio make it hard for anyone to increase revenues. everyone is off considerably from 2006-2007, and most markets are still off 30% to 40% depending on the local economy.

And entravision did extremely well last year by getting the World Cup for its radio properties, complementing the TV network coverage they got. That produced a considerable revenue spike for at least half of the year and some of the stations were up quite astoundingly... that is a move that definitely created revenue in a horrible economy.

 

[Buckethead]

This is indicative of the radio industry as a whole in post-consolidation era.

The problem is that in order to cut overhead they kill off the very product that they are selling.

Can you imagine a shoe company deciding that it cost too much to make shoes so they will stop making shoes and instead just keep charging the same price for the empty shoe box?

That's what killing off the talent and creative areas of radio is doing.

You have a format running on 103.1 that is originating in El Paso Texas (Population 700,000)
EVC gets the format for peanuts, and you get what you pay for.

 

[TheBigA]

This is indicative of the radio industry as a whole in post-consolidation era.

The problem is that in order to cut overhead they kill off the very product that they are selling.

Not exactly. Can you imagine a shoe company that continues to manufacture the same shoe, even though it's clearly out of style and doesn't sell any more?

That's what it seems like you want.

The issue isn't strictly cutting overhead. The issue is dumping shoes that are now out of style. At some point, it's time to move on to something new. Sure, there are folks who still love white suade hush puppies, and would continue to buy them. But that's not necessarily where the money is.

 

[Buckethead]

Yes, except as the topic of this thread indicates the shoe isn't out of style. The shoe in more in style then ever before, and Indie 103.1 is born out as a harbinger of popular fashion style. It's just that the company making the shoes got swallowed up by a large competitor that eventually sold off to a capital investment group which then sold off it's debt and now they need to charge 10x too much for a pair of shoes that looks like the original but is actually a far inferior knockoff made by underage labor.

It comes down to this.

If it weren't for overwhelming debt of the parent organization a station like Indie could be quite profitable.
This is essentially the problem with the economy as a whole in America. Consolidation fueled by massive debt
driving property values to an unnatural high requiring even more massive debt to continue the consolidations.
Eventually it all becomes about servicing the interest on a debt that cannot possibly ever be paid back.

Roll back the clocks when the value of a station was in a reasonable orbit and there were maybe 6 or 7 O&O stations per company (Even the big boys ABC, CBS etc) and you had a situation where a smaller company can make a very healthy profit with station that didn't need to be top 10 lowest common denominator formats.

This explains how a station like KPFK (with one of the better signals in the market) can survive on a .2 share.

 

[TheBigA]

Yes, except as the topic of this thread indicates the shoe isn't out of style. The shoe in more in style then ever before, and Indie 103.1 is born out as a harbinger of popular fashion style.

There's no upside to being a "harbinger of popular fashion style." Even after it becomes mainstream. You didn't see Arcade Fire thank Indie from the Grammy stage for all their help early in their career. The band doesn't care. If the band doesn't care, why should anyone else?

If it weren't for overwhelming debt of the parent organization a station like Indie could be quite profitable.

I think that's really overstating the truth. The fact is that the "overwhelming debt" didn't prevent them from taking a chance on the format in the first place. Especially since it was obvious it was going to be a niche format at best. I think others in this thread have already explained the truth of why this format is gone, and it has nothing to do with overwheling debt. Or Saul Levine would be putting it on KGIL tomorrow. He is free from any debt, and he's staying clear of the format, regardless of your prediction that it could be "quite profitable."

In case you don't know, KPFK is owned by Pacifica, who don't care about ratings as long as they have a platform from which to preach. Profits or ratings or being the "harbinger of popular fashion" don't matter. That's life as a non-profit with a political agenda. Ask them if they'll play your records.

 

[Buckethead]

On the contrary, EVC's overwhelming debt IS the reason Indie happened in the first place.

The KDL format was performing poorly, nothing on that signal was sticking. EVC was offered a deal where they had a guaranteed 2 million per year in the bank with almost no overhead. So you see it wasn't the format at all that EVC was interested in at first.

It was only when they saw CC raking in 8 million a year did EVC realize that there was more to be made by being out of that deal and continuing the format.

It was what happened after that where the station started going wrong.

And my point was that being "a harbinger of style" is a profitable venture. My point is that the culture is shifting
as evidenced by the success of bands like Arcade Fire and Mumford and Sons (Both on Indie labels) and that the format concept is perhaps now moving towards a more mainstream idea then when it first came on the air 7 years ago.

 

[Buckethead]

Im well aware of who owns KPFK. My point is they didnt get sucked into the black hole of consolidation fueled by massive un-serviceable debt and therefore they can operate on a much lower budget and not worry about needing the lady gaga audience.

 

[TheBigA]

Im well aware of who owns KPFK. My point is they didnt get sucked into the black hole of consolidation fueled by massive un-serviceable debt and therefore they can operate on a much lower budget and not worry about needing the lady gaga audience.

You have no idea what you're talking about. Pacifica lives from hand to mouth, with no operating capital at all.

As I said, Saul Levine's stations are all paid off. No debt at all. He's just chasing after the most profitable format. Notice what he isn't doing.

 

[Buckethead]

If Pacifica was bought with a 100 million in debt they wouldn't have the luxury of living hand to mouth being a fringe format. My very point.

Saul is doing fine with what he has and there is not a need to change it. But dont think he hasn't taken it into consideration.

and I meant to say in my previous post is " my point is NOT that being a harbinger of style..."

 

[TheBigA]

If Pacifica was bought with a 100 million in debt they wouldn't have the luxury of living hand to mouth being a fringe format. My very point.

I know a lot about Pacifica. "Luxury" is not one of the words that comes to my mind.

You're comparing apples and oranges, profits and non-profits, music stations and those with a political agenda. Huge differences, not worth discussing.

 

[Buckethead]

My point is only that the massive debt the companies are carrying has changed the industry for the worse.

I wish it weren't so, but it is.

I'd be happy to see fire sales bring the market into a more reasonable orbit but that may not be realistic.

I would be very happy to be living hand to mouth at KPFK.

 

[TheBigA]

My point is only that the massive debt the companies are carrying has changed the industry for the worse.

Sorry, but you're wrong. Debt is how companies finance capital improvement and growth. It's a basic fact of life if you run a corporation.

Without debt, you wouldn't have radio to begin with. Debt financed the creation of radio in the first place.

 

[Buckethead]

Prior to deregulation, before the buying frenzy that resulted in companies like CC
the cost of a radio station was such that they could be owned by individuals and not investment banks.
They property values skyrocketed due to these new megolopolies that were fuel by enormous debt.
Debt that we now see has exceeded it's ability to be repaid.

 

[ChannelFlipper]

My point is only that the massive debt the companies are carrying has changed the industry for the worse.

Sorry, but you're wrong. Debt is how companies finance capital improvement and growth. It's a basic fact of life if you run a corporation.

Without debt, you wouldn't have radio to begin with. Debt financed the creation of radio in the first place.

Generally, the judicious use of debt lowers a company's overall cost of capital due to the deduct-ability of the interest payments.

However many radio companies over-leveraged to their, and the industry's overall detriment.

 

[TheBigA]

Prior to deregulation, before the buying frenzy that resulted in companies like CC
the cost of a radio station was such that they could be owned by individuals and not investment banks.

Absolutely not true. Corporate ownership of broadcasting began in 1920, with corporations like GE, RCA, Westinghouse, and AT&T owning radio.

The buying frenzy that drove up station prices began in the 1970s, long before deregulation. Individuals haven't been able to buy radio stations, at least in major markets, for over 40 years. The technical and legal requirements are such that it's been a bad idea for individuals to put their own personal fortunes on the line for such purchases. You really need to learn the facts before you make these grand pronouncements.

But you keep ignoring the fact that there is a station group in LA owned by an individual, Saul Levine, who is unencumbered by debt, and he has avoided the format used by Indie. That's what you get when you have individuals owning radio stations rather than companies who are seeking growth and profit. If the format was the panacea you say it is, Saul would place it on one of his debt-free stations.