Audacy Bankruptcy Goes To FCC

[davideduardo]

Are you talking about CBS or Entercom? Because I would agree with you on Entercom.

CBS. And Entercom was also rather traditional as many family businesses are.

But CBS created their own steaming platform, Radio.com.

Eminently unsuccessful.

They integrated their radio and TV websites into one centralized local news platform.

Mostly a cost cutting efficiency move and not particularly successful based on page views reported at the time.

And they were part of the original team in the 90s that developed what later became HD radio.

HD was developed more than a decade before by Ma Bell's labs among others, and ceded when Bell was broken up to a series of shell company owners who passed it to Ibiquity which was mostly venture capital with participation by about 8 of the biggest radio owners. None of the radio owners had any technical input into HD, although an engineer from on participating company joined Ibiquity in more of a coincidence than a planned cooperation.

(I was, for a while, the HBC delegate to the Ibiquity functions. HBC was one of the Ibiquity broadcast stakeholders)

So CBS Radio management was far more advanced than Entercom's, as proven by the numerous mistakes Entercom made with streaming and podcasting. But all of those people left when CBS sold the radio division to Entercom.

Yet none of the CBS efforts in that area was any more successful. The real issue is that CBS Radio revenues had been stagnant or in decline for years because CBS never "bought in" to consolidation. And at the same time, they made silly purchases like a stand alone FM in Palm Springs to justify golf trips by executives.

If CBS had been retail, we would have called it "shop worn".

 

[TheBigA]

CBS. And Entercom was also rather traditional as many family businesses are.

But you said CBS had "no focus on new media, the internet, streams, and the like."

I have you examples where they were. You can argue how successful they were, but they were much more focused on them than Entercom or Cumulus or any other owner besides iHeart.

 

[davideduardo]

But you said CBS had "no focus on new media, the internet, streams, and the like."

Yes, because they did not have anything that worked. Nearly every company had some internet initiative, particularly after smartphones came out, but nearly none worked. Other than iHeart and Townsquare, what radio companies have productive web activities?

I have you examples where they were. You can argue how successful they were, but they were much more focused on them than Entercom or Cumulus or any other owner besides iHeart.

Or Townsquare, that now gets more than half of its revenue from that division.

None of the rest, from Cumulus and Entercom down through ones like HBC and Cox and Urban One and Alpha and on down, have anything near what you could call "eminently successful" new media activities.

 

[TheBigA]

Yes, because they did not have anything that worked.

But that wasn't what you said. You said they didn't have a focus. They did, but it wasn't successful. Which isn't saying much. Entercom came in and fired all the engineers and anyone who had knowledge of new media. Then they spent millions on a new name and buying podcast platforms that failed. They took a bad situation and made it worse.

 

[Kelly A]

A lot of fast food stores would love 15% now.

Not sure what fast food franchises/owned are that low. A good example is Yum! Brands; Taco Bell, KFC, Pizza Hut. (In the interest of disclosure, I am a shareholder in Yum!)
"Yum! Brands operating margin for the quarter ending June 30, 2024 was 33.06%."

• Brands average operating margin for 2023 was 32.16%, a 1.77% increase from 2022.
• Brands average operating margin for 2022 was 31.6%, a 1.89% increase from 2021.
• Brands average operating margin for 2021 was 32.21%, a 12.62% decline from 2020.

Grocery stores would love 5% profit after expenses. Traditionally 1 to 2 percent after expenses, there are a whole lot of dollars in the grocery business and has made some folks rich.

Is that why Kroeger and Albertson's are eager to merge because they're both doing so well? Come on.
Walmart is killing most other traditional grocery stores due to their size and volume leverage with suppliers. Unlike every other retailer other than Amazon, Walmart owns its entire distribution model. That scale has given them a huge advantage of being a one-stop-discount place for the masses.

Part of Walmart's success has been to run the grocery business at cost or 1% profit, get folks in store and sell general merchandise with tremendous mark ups thanks to sourcing from China and other low cost of labor countries.

Here's a good simplistic article on how the Walmart Effect works from Investopedia: The Walmart Effect Explained, With Pros and Cons
and Forbes: What Is The Secret To Walmart’s Success?

Getting back to the radio thing; Radio has never, ever had the scale or national footprint that a major retailer like Walmart or fast food chain. Traditional media businesses are made up of really three large national groups of which two are keeping their heads above water but hold a ton of debt from the past.
The rest are small groups and mom-and-pop operations, many of which since the 2008 recession and more recently, a global pandemic have seen values cut in half over twenty years. All of which, their valuations as a business took two massive haircuts, leaving them with little to no hope for growth as an industry as listeners kids grow up consuming media from a smartphone.

 

[davideduardo]

But that wasn't what you said. You said they didn't have a focus. They did, but it wasn't successful. Which isn't saying much. Entercom came in and fired all the engineers and anyone who had knowledge of new media.

The idea of a web presence to nearly every station "BSP" (Before Smart Phones) was the construct that made Mark Cuban rich: station websites with personality profiles of the jocks, little ads for station clients, maybe the current weather, promos for contests, pictures of station jocks and station events and the like.

Both the Entercom and CBS had that sort of site, with little beyond the basics. Yes, the CBS news stations did have news content, but it was not rapidly updated the way news sites are today.

Neither moved into the creation of something useful and worth going back to often. But, really, neither did anyone else... and most still don't have anything of value on their web sites.

Then they spent millions on a new name and buying podcast platforms that failed. They took a bad situation and made it worse.

Like nearly everyone else. Heck, Univision bought a bunch of totally unrelated English language sites, thinking they could create Spanish language versions... they lost several hundred million on that excursion in the period where radio and TV broadcasters tried to figure out where they could go to snag their listeners and viewers who were spending less time with OTA media and more time with online games and content providers.

Even the often cited Clear Channel started pouring money into outdoor, live events and broadcasting in other nations. That turned out to be both a distraction and the divisions were sold when the cash was needed elsewhere.

 

[CTListener]

The idea of a web presence to nearly every station "BSP" (Before Smart Phones) was the construct that made Mark Cuban rich: station websites with personality profiles of the jocks, little ads for station clients, maybe the current weather, promos for contests, pictures of station jocks and station events and the like.

Both the Entercom and CBS had that sort of site, with little beyond the basics. Yes, the CBS news stations did have news content, but it was not rapidly updated the way news sites are today.

Neither moved into the creation of something useful and worth going back to often. But, really, neither did anyone else... and most still don't have anything of value on their web sites.

How much traffic do "Last Songs Played" playlist-update features attract?

 

[Kelly A]

How much traffic do "Last Songs Played" playlist-update features attract?

Probably nothing measurable. Remember iTunes tagging? Cue the nighttime cricket and toad sounds.

 

[secondchoice]

Not sure what fast food franchises/owned are that low. A good example is Yum! Brands; Taco Bell, KFC, Pizza Hut. (In the interest of disclosure, I am a shareholder in Yum!)
"Yum! Brands operating margin for the quarter ending June 30, 2024 was 33.06%."

• Brands average operating margin for 2023 was 32.16%, a 1.77% increase from 2022.
• Brands average operating margin for 2022 was 31.6%, a 1.89% increase from 2021.
• Brands average operating margin for 2021 was 32.21%, a 12.62% decline from 2020.

Is that why Kroeger and Albertson's are eager to merge because they're both doing so well? Come on.
Walmart is killing most other traditional grocery stores due to their size and volume leverage with suppliers. Unlike every other retailer other than Amazon, Walmart owns its entire distribution model. That scale has given them a huge advantage of being a one-stop-discount place for the masses.

Here's a good simplistic article on how the Walmart Effect works from Investopedia: The Walmart Effect Explained, With Pros and Cons
and Forbes: What Is The Secret To Walmart’s Success?

Getting back to the radio thing; Radio has never, ever had the scale or national footprint that a major retailer like Walmart or fast food chain. Traditional media businesses are made up of really three large national groups of which two are keeping their heads above water but hold a ton of debt from the past.
The rest are small groups and mom-and-pop operations, many of which since the 2008 recession and more recently, a global pandemic have seen values cut in half over twenty years. All of which, their valuations as a business took two massive haircuts, leaving them with little to no hope for growth as an industry as listeners kids grow up consuming media from a smartphone.

The YUM company stores are usually the very best locations and they pay no franchising fees. According Food Industry: which quotes the National Restaurant Association:

"According to a report by the National Restaurant Association, the average profit margin for fast food restaurants is around 5-8%. This means that for every dollar of sales, the restaurant earns 5-8 cents in profit. However, some fast food chains have profit margins as high as 20%."*

*What are the profit margins in the fast food business? - FoodIndustry.Com.

Kroger has its own distribution system kinda. They sold their trucking operation to a captive operator (like Fed EX Ground) but the drivers are still Teamsters.
They still have "Kroger Manufacturing" which contracts with various manufactures for store brands. They use to own the bakeries that made the shelf bread and several other supply operations until KKR made a hostile take bid back in the 1988 and Kroger paid a one time dividend of $40 per share which required them to sell a lot of their company owned manufacturers.

There are / were "National" Network operators NBC Red and Blue (ABC), CBS, Mutual but the politicians were afraid (rightfully so) of any body owning 100's of radio stations before TV. TV ownership still has a national viewer cap and of course there is the market cap rules for radio.

BTW: Did you get you stock when Pepsi spun off YUM in 1997? That was a sweet deal for the shareholders. Non of this "Reverse Morris Trust" crap win which the shareholders end up with an overleveraged soon to be worthless stock in the spun off company. I still have not heard where a group of radio stations survived without bankruptcy after be divested by the Reverse Morris Trust method. I see the tax angle but in the long run ?

I am still waiting for my Pepsi shares to flourish after the Pepsi - Frito Lay breakup.

 

[Kelly A]

*What are the profit margins in the fast food business? - FoodIndustry.Com.

Not that there is any similarity between businesses, but the fast food industry has the reverse of radio. Larger radio markets have lower overall margins due to costs, payroll, and competition, while smaller markets have lower overall expenses equalling higher margins. That said, with digital sweeping away most national advertising from traditional media in larger markets, and legacy local advertisers being replaced by online and big-box retailers, radio margins as a whole are averaging under 7%.

There are / were "National" Network operators NBC Red and Blue (ABC), CBS, Mutual but the politicians were afraid (rightfully so) of any body owning 100's of radio stations before TV. TV ownership still has a national viewer cap and of course there is the market cap rules for radio.

But this was in the 1940's when radio was fairly new and still the only game in town. The government was concerned about what could be considered 'editorial dominance' by any one entity influencing the American public.

BTW: Did you get you stock when Pepsi spun off YUM in 1997? That was a sweet deal for the shareholders.

I believe I became a Yum shareholder back in 2000. Shares were down at the time and they announced paying a dividend in the future. The stock has treated me well, although I turned down the offer of shares in Yum! China when offered.

 

[TheBigA]

Here's more about the FCC review of the Audacy bankruptcy plan:

Reports That The FCC Has Approved Audacy Reorganization Are Premature.

The New York Post reports the FCC has enough votes to approve Audacy’s proposed bankruptcy reorganization with a 3-2 party-line vote. If accurate, it would pave the way for Audacy

www.insideradio.com

One new bit is that the FCC could approve the bankruptcy without completing the foreign ownership waiver.

Insiders say Audacy isn’t looking for a new shortcut or a fast-track process, and that a full foreign ownership review will still take place after Audacy emerges from bankruptcy. They point out it is similar to the structure that has been used in several other Chapter 11 reorganizations in radio during the past several years, including iHeartMedia in 2019, Cumulus Media in 2018, LBI Media in 2019, and Alpha Media in 2021.

 

[K.M. Richards]

Here's more about the FCC review of the Audacy bankruptcy plan:

Reports That The FCC Has Approved Audacy Reorganization Are Premature.

The New York Post reports the FCC has enough votes to approve Audacy’s proposed bankruptcy reorganization with a 3-2 party-line vote. If accurate, it would pave the way for Audacy

www.insideradio.com

As reported in that story, though, the New York Post reports of it making it sound like it's been already approved are stretching the facts a bit.

 

[TheBigA]

As reported in that story, though, the New York Post reports of it making it sound like it's been already approved are stretching the facts a bit.

It appears republican house reads the NY Post, because they have now launched an investigation into the FCC:

Comer, Langworthy Probe Politicization of FCC with ‘Shortcut’ Decision to Facilitate a George Soros Deal to Obtain a Major Stake in Over 200 Radio Stations - United States House Committee on Oversight and Government Reform

United States House Committee on Oversight and Government Reform

oversight.house.gov

There has been no approval, and there is no shortcut. But that doesn't matter.

“Despite the unprecedented nature of this action, the FCC majority has apparently decided to approve licenses on an accelerated timeframe for a company in which George Soros has a major ownership stake, and with stations in 40 media markets reaching ‘more than 165 million Americans.’ By all appearances, the FCC majority isn’t just expediting, but is bypassing an established process to do a favor for George Soros and facilitate his influence over hundreds of radio stations before the November election."

They're completely making things up. There IS precedent for approving bankruptcy before completing foreign ownership review. And the FCC is not bypassing the process. There's also no evidence that Soros would make any changes in programming at any stations. Hello Chicken Little.

 

[TheBigA]

The conservative media machine has taken this story and is reporting it as fact. But it's not. The house called in 2 Republican FCC Commissioners, who proceeded to lie about what's happening with Audacy. Here is text from their questions to Brendan Carr:

https://www.realclearpolitics.com/video/2024/09/24/fcc_commissioner_brendan_carr_fcc_creating_a_new_shortcut_for_soros-backed_group_to_buy_hundreds_of_radio_stations_before_november.html

He is lying. The Soros group would NOT take ownership of the stations. The ownership would still be held by the newly formed Audacy company.

Here's another story, reported by a station in Indianapolis. They're reporting it as fact. It is not:

The FCC Is Fast-Tracking Soros' Acquisition of 200 Radio Stations

George Soros' attempt to purchase hundreds of radio stations has not only been approved but is being expedited by the government agency overseeing broadcast regulations.

wibc.com

They are seeking to prevent an American citizen from spending his money. There is no law that prevents any American citizen from buying stock in a radio company. But that's what they're trying to prevent. They held this hearing to create public outcry. It's also being done to influence voters.

All of this came out of the initial reporting from the Post. Completely fabricated.

 

[davideduardo]

All of this came out of the initial reporting from the Post. Completely fabricated.

Remember, those people are motivated into opposing the sale by the transaction financed by Soros to acquire the dog Univision Radio stations two years ago; Soros financed that to keep the intended purchaser, Salem, from getting those facilities and starting a national conservative Spanish language talk network.

 

[TheBigA]

Remember, those people are motivated into opposing the sale by the transaction financed by Soros to acquire the dog Univision Radio stations two years ago; Soros financed that to keep the intended purchaser, Salem, from getting those facilities and starting a national conservative Spanish language talk network.

Back then, all of the Chicken Littles claimed he bought those stations to influence Hispanics into voting for Biden. It never happened. But had Salem bought the stations, we all know what they would have done. They're saying the same thing here. They claim he's buying this debt in order to silence conservatives. All Chicken Little talk.

Republicans have lots of billionaires who could have outbid Soros for those stations or replace him in buying Audacy debt. Where's Elon Musk?

 

[davideduardo]

Back then, all of the Chicken Littles claimed he bought those stations to influence Hispanics into voting for Biden.

And that is because the buyer's management has no idea of what a radio station is, and still have not learned. The intent was first to keep the stations away from Salem, and then to do a progressive type... or types... of programming. But nobody there had any radio or programming experience and it was like the proverbial story of trying to get a thousand monkeys at a thousand typewriters to come up with something better than shakespeare.

It never happened.

Due to lack of competence. Not "incompetence" but just total lack of knowledge of radio.

But had Salem bought the stations, we all know what they would have done.

And still, nobody would have listened. As has happened with every attempt to create a national Spanish language talk web.

Republicans have lots of billionaires who could have outbid Soros for those stations or replace him in buying Audacy debt. Where's Elon Musk?

In the case of the former Univision stations, nobody wanted them as there was ample proof that they were not going to be politically useful or effective.

In the Audacy case, nearly nobody wants any group of radio stations, good or bad.

 

[TheBigA]

The intent was first to keep the stations away from Salem, and then to do a progressive type... or types... of programming.

If that was the intent, why didn't they hire someone else? It's not like Soros can't afford it. The truth is it was NOT their intent. That was all made up lies to rile up the base. But we know what Salem would have done. When they point fingers at someone else, what they're really saying is "This is what WE would have done."

In the Audacy case, nearly nobody wants any group of radio stations, good or bad.

Then why make such a big deal? I said the same thing with the Univision purchase. If no one is listening, why make such a big deal? Because it's about creating negative media and influencing the election. That's why they held that hearing.

The FCC had NO intention of approving the Audacy deal early or fast tracking the ownership waiver. They're not total idiots. They can see what's happening. They're doing everything by the book in plain view, and that's not good enough. So the Post creates a story with no facts and gets the same results. This is what Tyranny looks like.

 

[Mark Roberts]

Republicans have lots of billionaires who could have outbid Soros for those stations or replace him in buying Audacy debt. Where's Elon Musk?

They won't do that because then they would be more exposed to public view and would be responsible for actually following through on their purported desire to propagandize their point of view. It's far easier to take potshots from the sidelines and to just generally whine (a case in point: 'Venezuela ahead' billboard warns drivers entering Colorado).

Recall that Musk was a reluctant buyer of Twitter; basically his mouth wrote checks that he suddenly found himself having to cash.

 

[davideduardo]

If that was the intent, why didn't they hire someone else?

I don't know. The whole deal has "stupid" written all over it. The two women who put the thing together were political operatives and are later generation Hispanic Americans. I don't even know if they speak Spanish. I do know that they have no radio or media experience.

It's not like Soros can't afford it.

But he needs someone with industry knowledge to guide his enterprise. I've told the amusing story of filling in the online application in which I have a demonstrable history of significant success in Spanish language radio... and I did not get even a "thank you" response.

The truth is it was NOT their intent. That was all made up lies to rile up the base. But we know what Salem would have done. When they point fingers at someone else, what they're really saying is "This is what WE would have done."

Knowing the intent of either of the purchases is not fathomable. The TU spin-offs are total dog facilities for the most part. The Audacy situation is a case of mostly "at their peak" stations with only a downside and a very behind-the-business internet and streaming effort.

Then why make such a big deal? I said the same thing with the Univision purchase. If no one is listening, why make such a big deal? Because it's about creating negative media and influencing the election. That's why they held that hearing.

The Republicans are wasting useful time on this. Somebody should tell them that buying Audacy, even if authorized tomorrow, could not result in any meaningful political influence in the immediate time span.

The FCC had NO intention of approving the Audacy deal early or fast tracking the ownership waiver. They're not total idiots. They can see what's happening. They're doing everything by the book in plain view, and that's not good enough. So the Post creates a story with no facts and gets the same results. This is what Tyranny looks like.

Again, the press has little understanding of radio, TV or even the web. Print is in such a period of contraction that, other than sports scores and stats, there is not much in most papers worth spending money on.