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Article: Radio Industry Heads for a Shakeout

Actually, CC is probably the LEAST safe. They went private by being bought by a hedge fund. That means they are probably even more highly leveraged than before. But now that they are private, we don't know how much. And Hedge funds are facing serious losses, capital withdrawal and cannot borrow money to rid the storm. So if their hedge fund sneezes, CC catches cold.

Citadel is also highly leveraged and would be # 2 on my list.

Cox has not done anything crazy. They will ride things out.
 
But, I believe CC could sell off a lot of stations or one of its divisions if nothing else could be done, correct? They have more assets to sell to raise cash than the others.
 
i agree with car-radio. cc has more assests to play with. the smaller companies and the mom and pops will feel it the worst. the private investors of cc will probably trim all the fat, sell off the non performing clusters, and package it up and put a shiney bow on it for a new buyer in the future.
 
carolinaradio said:
I believe CC could sell off a lot of stations or one of its divisions if nothing else could be done, correct? They have more assets to sell to raise cash than the others.
Click to expand...

In more normal times, your logic would be "on-target". To sell properties, there have to be buyers who can come to the table with a pot-ful of money.

What we don't know is this: Are there buyers standing around waiting for a golden opportunity who have the cash and/or the borrowing availability who can be the other half of the transaction?

Is is possible that every investor who has the "free spirit" and ability to be in the broadcasting game.... is already in the game... and also needs to sell some stations?

Time will tell.
 
Goat:

You are correct. The only buyers are those that can pay cash, those transactions willing to accept buyer paper, or those with existing credit lines. Most consolidators are underwater and are seeking unrealistic stick values. In a downturn, few sellers are willing to take a buyer's note, and those with existing credit lines are holding on to them in case times get even more lean.

If CC or any other big consolidator does need to start paring off assets, the stick values will plummet -- ala the housing market.

Bad situation to be in if you are a broadcaster carrying debt.
 
Good points Dudefan. At least CC was able to go private before this latest economic downturn. With people like Citadel at 20 cents per share, they would not have the money to buy back stock and go private, nor would anyone loan them that kind of money. And neither CC or Citadel (or anyone else) can afford to take low dollars for their properties, so selling off is not an option. Basically, they are all in deep doo doo right now. The sad part is, the only way to increase the value is to come up with new, creative ways to bring back old listeners and create new ones. But to cut expenses, they are getting rid of the very people who are capable of saving them.
 
I'm hopeful to see a complete REVERSAL of consolidation, frankly. CC has already sold off what they considered their non-core assets to GAP and such a couple of years ago, didn't they? So now if/when they cut, they won't be cutting fat, they'll be cutting meat.

And the irony of a Cumulus head talking about radio companies folding. I was on-board a station that Cumulus hd swallowed in their infancy, and remember when their stock debuted at over $17 a hsare. It's under a buck now, and they're in a position to discuss OTHER companies' downfall(s)? Hilarious.

They've bought CLUSTERS at pricetags higher then their entire company's worth now. And saying they're leveraged by Bank of America isn't exactly an assuring thing, given Citicorp, Wachovia, et al, and their tumult of late, is it?
 
Seriously, let's look at this from a broader scope, though. Big companies bought up smaller companies, cut staffs, prophet-systemed and syndicated larger market talents to smaller market stations, thus, in essence, de-valuing their properties. These larger companies then sold their inventory at lower rate(s) to beat the competition out of buys because, well, they had lower overhead and COULD do so. So while their profit margins might have looked better in the short-term, they'd A. de-valued their product, B. cared not a bit about what listeners actually wanted and C. hit the streets with rate cards SHOWING ad-buyers that radio, in general, was worth less than they'd previously believed it was. Brilliant.

There are stations with voice-tracked out-of-market midday jocks AND Seacrest in mid-afternoon or late-afternoon drive, an out-of-market morning or night show (or voice tracked again), and we WONDER why folks aren't as loyal to their favorite stations as they had been in years past?

And now of course, to save money, the bigger companies make sweeping "no more night jocks" edicts; so in CHR, modern rock, modern country formats, we're just not going to serve the up-and-coming 18-34 demo. That ought to make radio continue to be viable in the near future, eh?

Radio's demise began when the bean-counters started calling the shots.
 
And as far as Columbia goes....what more can CC cut out of their budgets locally? WNOK is all voice-traced or sat..Steve FM is a computer in a closet, etc. Citadel, unfortunately, may have to make some hard choices. That's a shame because they've been trying their best to be local and live and involved. What about Inner-City? Don't know what kind of shape that co. is in......
 
Bugz said:
The sad part is, the only way to increase the value is to come up with new, creative ways to bring back old listeners and create new ones. But to cut expenses, they are getting rid of the very people who are capable of saving them.
Click to expand...

There are a couple of threads already going over in The Business of Radio that have pretty well beat this subject of "The Evils of Corporate Radio" to a bloody pulp. Some of the participants are about to beat each other to a bloody pulp. ;D

I would propose to you that what is going in with these companies as we speak has very little to do with what they are programming and what they are staffing. If you have never lived through the bankruptcy of a publicly held company, you may have difficulty wrapping your mind around solutions.

To discuss voice tracking and fine tuning the programming is like the old cliche about "rearranging the deck chairs on the Titanic when they should have been closing the safety hatches and getting people into lifeboats. Today's prices of the corporate radio groups are probably more about liquidity of the company and the economic tsunami that is hammering every industry in America today.

To talk about voice-tracking being the cause of radio's problems is like saying if GM had used a timing gear instead of a timing belt on some 4-cylinder engines, they wouldn't be in trouble today.

Written by a survivor of the sinking of Inacom in 2000, the "dress rehearsal" for Enron.
 
These are all great posts...certainly didn't expect to get so much insight.

I don't know about CC/Columbia...WALC/Charleston is still for sale, right? Isn't it Aloha Station Trust?

but CC/Greenville seems to have things spread as thin as possible. 96.7 doesn't have anybody on. WMYI is voicetracked afternoons and syndicated nights. WESC has 3 jocks working long shifts. WSSL doesn't have a night jock (this is all coming from websites, I'm sure they have vt'd weekends). Both AMs are under LMAs.
 
The voicetracking and job cutting is a symptom of decisions made early on to leverage up to acquire stations. Easy money=higher prices=more debt. Exact thing that happened with housing.

Right now the alarm bells are going off as the ship is sinking and they are throwing everything overboard in an attempt to save the ship. The end result is, yes, they are devaluing the product in innumerable ways. I don't think that was the intent, but it is going to eventually have irreparable damage. I think the decisionmakers know that, but when you have to make that loan payment every month, and revenue is dropping (both because of the economy and because of prior decisions) there isn't much choice.

As for Citadel, unfortunately I don't know how much longer Bill McElveen will be able to keep them at bay. Fortunately, they've got one of the best salesforces in town, so tinkering with Citadel Columbia would be like playing with the Golden Goose. As for Inner City, they are not known for being terribly good operators. But they didn't go crazy either. Without looking at their SEC reports, I don't know how leveraged they are. I doubt that they are.

In the end, you will local operators picking up the pieces at bargain prices.

I forgot to add that stock prices are not a direct indication of the financial health of an entity. While the financial health is one factor, stock prices go up and down based on the perceived value of the assets (both hard and cash) and the short-term prospects of the industry. Right now, investors don't look kindly upon the sector as a whole. So don't look at the stock prices as the whole story. Cumulus may be in good health. Without reading the SEC reports, I can't tell you that. But Cumulus stock was generally trading sub-$10 for periods of time, so it's not like they went from $100 to valueless.
 
DudeFan said:
The voicetracking and job cutting is a symptom of decisions made early on to leverage up to acquire stations. Easy money=higher prices=more debt. Exact thing that happened with housing.
As always, Steve, you hit it out of the park.


In the end, you will local operators picking up the pieces at bargain prices.
And I hope this one is hit "...deep, and I don't think it's playable", as well. In fact, I'm counting on this scenario ensuring that the "art" of radio returns to do battle with the "science" part of radio once again, with the resulting fallout being the dwindling and possible elimination of "cookie cutter" radio stations across this great big broke country of ours.(AND THE ENTIRE BOARD SIMULTANEOUSLY BREAKS OUT IN SONG AND DANCE!!!)


But Cumulus stock was generally trading sub-$10 for periods of time, so it's not like they went from $100 to valueless.


I know about as much/little as anyone on the board about the inner workings of Cumulus and their fiscal health, but I've got a very good friend in the upper echelon of Cumulus in Atlanta and, I have to say, despite its drawbacks(they are just as culpable as the other monolithic broadcast entities for the decline of compelling radio), it seems(at least to me) to be a well managed company from a fiscally responsible standpoint.
Click to expand...
 
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