Absolutely correct, no fire sales needed. However, if EFM or a cash buyer proposes an acquisition for a non-strategically important station at an acceptable price, I would certainly expect them to listen and perhaps accept that offer.
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Audacy Filed For Bankruptcy
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Lance Venta writes about what's next for Audacy, pointing out some similarities to the Cumulus Chapter 11 filing back in 2017:
radioinsight.com
The Audacy Bankruptcy: What’s Next?
As the radio and financial industries begin to digest the pre-packaged Chapter 11 bankruptcy filed by Audacy on Sunday, I
radioinsight.com
man, it took a few more years, but the 3rd of the now big 3 in Radio finally filed for Ch. 11 Bankruptcy, both Cumulus and IHeart already did it years earlier in 2017-2018.
All caused by the same thing: Too much debt. All three were doing just fine until something happened that caused them to acquire too much debt. It wasn't radio that killed them.
Listeners (particularly ones who grew up in the 80s-90s) are always negative about stations trying to appeal to generations after them with newer artists. There's always people complaining on say, KROQ socials for example because of "the music they play", "the hosts they got rid of", "being trendy", and its the same stuff that gives me vibes to some 91X listeners on how alt radio should just be the same 90s songs. its annoying
They tried to stop thinking "small time" when they did the CBS deal. That's what created the debt problem. It didn't just happen. Many people here seem to shill for David Field. His Goldman Sachs experience didn't help him in Radio apparently. If they can't monetize all these great platforms you keep talking about, then it's a competence problem...
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Simply getting more stations was obviously not the solution. That business model didn't work. Successful companies don't file bankruptcy and beg to get their debt discharged. I guess in Radio it's acceptable...
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That whole narrative is done and over. David Field isn't really in charge any more.
You need a new boogie man.
I’m not extremely informed on Salem, exactly what has caused their massive issues this past year, especially the past 6 months? They seem to be heading toward some kind of possible bankruptcy but I don’t see that they’ve gone on any notable shopping sprees in the last decade, or longer, and most of their programming is through their syndication arm. Is it just from the financial state of broadcast radio? I know they have additional assets (some they’ve been selling).
It's just from the financial state of Salem. I wouldn't broaden it to "radio."
The excuses are just executive mumbo jumbo excuses - pandemic, ad revenue, blah, blah, blah. The real issue for iHeart before their bankruptcy and now Audacy is taking on WAY too much debt for what are essentially small, local businesses. Aggregating them together in one giant corporate blob can streamline a few things, but if they are run in too much of a cookie cutter, corporate way then they lose their competitiveness vs SiriusXM, Spotify, other streaming options which already have that non-localized approach covered.
At one point iHeart's debt was more than the total of all yearly revenue for the ENTIRE radio industry in the U.S. I think it was pretty clear from the beginning they would never pay that back. Audacy fell for the CBS deal where CBS had CBS Radio borrow a bunch of money before the sale handing that cash over to CBS, Inc. that Audacy was forced to pay back. This was all crazy gambling by the lenders and borrowers. Supposedly Les Moonves figured the local TV group was subsidizing the radio side to some degree so surely it could be surmised the radio side could not handle a big debt load.
I've long thought that part of the FCC license transfer process should be a financial/debt review to ensure the stations involved can still be operated in the public interest after the transfer. Of course, that will never happen as the lenders have too much lobbying power and it would likely impact station values since closing deals would require less leverage thus less money available for station deals.
At one point iHeart's debt was more than the total of all yearly revenue for the ENTIRE radio industry in the U.S. I think it was pretty clear from the beginning they would never pay that back. Audacy fell for the CBS deal where CBS had CBS Radio borrow a bunch of money before the sale handing that cash over to CBS, Inc. that Audacy was forced to pay back. This was all crazy gambling by the lenders and borrowers. Supposedly Les Moonves figured the local TV group was subsidizing the radio side to some degree so surely it could be surmised the radio side could not handle a big debt load.
I've long thought that part of the FCC license transfer process should be a financial/debt review to ensure the stations involved can still be operated in the public interest after the transfer. Of course, that will never happen as the lenders have too much lobbying power and it would likely impact station values since closing deals would require less leverage thus less money available for station deals.
I hate to break it to you, but the pandemic happened. Maybe not to you, but it happened. We're all still dealing with the after-effects of the pandemic and what it did to all of us individually, collectively, and financially. The loss of ad revenue is an after-effect of the pandemic. It's hitting everyone including Spotify, Sirius, and even NPR. Any ad-supported media is being hurt by this, not just radio or Audacy.
Lenders aren't lobbying the FCC. That's just fiction. There is no one putting guns to the heads of lenders forcing them to lend money to radio companies. The lenders are the ones taking the haircut here. At the time this deal was done, Entercom was one of the strongest radio companies in the industry. Everyone was rooting for them to get CBS Radio because they knew Entercom wouldn't decimate the all-news stations or the other heritage brands. So if there had been a debt review before this sale was approved, Entercom would have passed. Things were just fine for them for the first few years. Then the pandemic hit, and they lost 50% of their revenue. You may call that an excuse, but if it is, it's a good one.
Financial review is part of the process in other countries, notably in Canada where it plays a major role in the CRTC's decision making.
Financial review is part of the process here too. Both the FTC and the DOJ review all sales. Entercom was forced to divest about 13 stations before it was approved. Once again, at the time, Entercom was a very strong company. But it's mainly incumbent on the companies lending the money to make sure they will get paid back. They're the injured parties here. Not the government or the FCC.
Clear Channel and Jacor before that tried to buy everything in sight in order to engineer move-ins into bigger markets. Once they no longer needed the Mount Vernon, Ohios and Crossville, TNs they sold them off...though still retain some they couldn't sell
Audacy was hit by a perfect storm of three elements: the accelerated growth of Internet audio options, the COVID pandemic and an inflationary recession in the economy. Such a situation could not be predicted in any economic model.
That's a misstatement. Example: Every McDonalds is a small local business.
Yet "national" radio stations are the rule in most of the free world where commercial radio operates. And those are the most successful. Much of the reason is that advertisers and their agencies vastly prefer making a single national buy with far less paperwork and expense.
And, when the 2008 recession hit, the buyers tried to escape from the deal. They could not and had to do it. In any case, the blame lies with investment bankers, not radio.
But the business model worked before the Pandemic hit radio for more than half of its revenue at the worst point.
Almost nowhere in the world is financial ability regulated. Canada, one nation that tried that, has backed off quite a bit. And still stations and groups are failing despite the prior controls... which could not anticipate the effects of on-line streams, a pandemic and an inflationary recession.
Except that the economy is cyclical and that much is predictable. The previous big radio bankruptcies were also due to debt and recession.
The real problem is the YOLO risk taking that permeates Wall Street business culture. If you look back at the discussions when Entercom was doing its merger with CBS there was plenty of eye rolling from so many people who knew where it would go, one way or another.
No, those groups thought they could create "State Packages" to sell with coverage of every market or area of the state. Clear Channel's and Randy's Ohio effort was the most developed... it did not work.
As I just mentioned, the Clear Channel
The other big bankruptcy was caused by the lack of leadership competence. Bad management.
Before the pandemic, I heard of no such "eye rolling". Most people thought that a sale to Entercom would preserve the heritage CBS stations.
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