Audacy Filed For Bankruptcy

[davideduardo]

The elaboration was helpful, very much agree with you. With KROQ, I’m afraid that a lot of the Gen Zers who KROQ would appeal to isn’t looking to radio, at least in my anecdotal experience, for music, and I am sure part of it is that they do not want to keep hearing the same burnt out golds… that said what KITS is doing is worth observing, trying to bridge that gap with a decently wide playlist.

Again, playlists are determined by the number of songs that don't cause a significant negative reaction by a significant percentage of listeners who like that station and format. As such, they are songs that got nearly total positive "I'd like to hear that song today " scores so they are definitely not burnt out.

On the opposite end of the spectrum, in New York, there is whining ad-nauseam (at least on here) about WCBS not being an oldies station anymore (technically speaking, it has not been an “oldies” station in over 18 years). The station is now shifting into playing more 90’s and 2000’s hits and to some who remember/grew up with the WCBS of the 80’s and 90’s, that it is sacrilege. All radio formats have to evolve to stay relevant.

Not just relevant. Playing 60's and 70's pop gold is relevant... but just to people outside the ages advertisers and their agencies seek today.

For a classic hits station, every year about 5% to 6% of the target audience ages out and the same percentage enters the door to join the group that the station wants to have as listeners.

 

[Mark Roberts]

There are people - including Field himself and a couple here more locally - who seem to be intent on saying that Audacy was merely the victim of circumstance, and that they didn't make bad decisions at all. It wasn't the decisions...it was the debt! The pandemic. The market conditions. The company was doing everything (or most everything) right, but gosh darn it everything else went bad.

Not sure I want to get into a shadow-boxing match here, so I'll just say that I think Audacy did make some bad decisions, but also tried to rectify them and ran out of runway. Field ultimately is accountable, and that accountability is happening through the bankruptcy process. Audacy has some good stations. It's not the iHeart fast-food franchise model of serving something that resembles food and makes money but really doesn't taste very good.

There were other radio companies that managed to survive the "perfect storm" Field blames for Audacy's woes without going into bankruptcy. Spread the blame beneath Field to his subordinates, but the newly-bankrupt company is the victim of more than just circumstance.

Those companies were also smaller, and more focused. iHeart, Cumulus, and now Audacy all have been through Chapter 11. This indicates to me that the notion of "scale" has been oversold and there is a size beyond which a radio-only company will have its costs outpace its ability to maneuver strategically. (Field bought into that with the CBS radio purchase; now he's paying the price.) Financiers like the notion of "scale" because it helps them put together bigger and bigger agglomerations, with consequent bigger and bigger fees. But, ultimately, a company can become too big to run, though that doesn't become apparent until a company undergoes significant stresses...and radio is a significantly stressed business nowadays.

 

[Kent]

There are people - including Field himself and a couple here more locally - who seem to be intent on saying that Audacy was merely the victim of circumstance, and that they didn't make bad decisions at all. It wasn't the decisions...it was the debt! The pandemic. The market conditions. The company was doing everything (or most everything) right, but gosh darn it everything else went bad.

I haven't seen a lot of love for David Field on these boards. He might not have been as despised as Lew Dickey, but he's always been a love him or hate him kind of person. If you’re the CEO of major company and everyone loves you, you’re doing something wrong. That was one mistake David Field never made. I don’t see how pointing out Audacy's crash was the result of debt is excusing him in any way. I haven’t seen anyone say taking on that debt wasn’t his decision. I also haven’t seen much of anyone say he was doing everything right. He obviously made mistakes by trying to take the company back to the future and dismantling much of Radio.com, getting rid of many of the CBS people he inherited, and trying to rebuild from scratch what he dismantled a couple years later.

The pandemic, on the other hand, is not something anyone could've predicted. As others have mentioned, in-car listening went down to next to nothing. A significant number of smaller businesses that bought radio closed during the pandemic, and many of those never came back. Those that didn’t shut down shifted more of their business to online ads. They were able to get onto multiple platforms for the same or cheaper, and they could reach their customers wherever they were. Consumer habits also changed at a faster pace with more people migrating to online entertainment. Those migrations are proving to be permanent. Field couldn’t have done anything about clients going out of business because of the pandemic. He could’ve been ready, or more ready, for the shift to online if he had kept moving forward with CBS Radio's digital division.

There were other radio companies that managed to survive the "perfect storm" Field blames for Audacy's woes without going into bankruptcy. Spread the blame beneath Field to his subordinates, but the newly-bankrupt company is the victim of more than just circumstance.

Other companies may have survived that perfect storm, but how many are better for it? My guess is none. I can tell you that you could buy any cluster in my market for the right price, but you wouldn’t. Those right prices are a lot more than what those clusters are worth today. My market was a $7 million market 20 years ago, and it's still a $7 million market today. Two clusters split most of that revenue pretty evenly with the crumbs going to a few mostly edge of market clusters and stations. Cumulus bought one of the clusters for almost $40 million in 2004; it's not worth a penny over $15 million today. Cumulus isn’t going to take a $25 million haircut when it’s still squeezing profit out of that operation. The other major cluster doesn't have that price tag hanging over it, but no one is going to pay what the owners want for it as they're not likely to cash out for $15 million anytime soon either. They've tried expanding into print (ironically, buying out the publications that the pre-Cumulus operators of the other cluster once owned) to make up for radio's sales declines. Good luck to them on that! The family owned Christian station sold to EMF after the patriarch died and is now running K-Love. The station that was shut down in 2001 due to the owner's misconduct is back under new ownership. So, the total station count is the same. One of those edge of market stations did almost $1 million/year between a couple hundred thousand here and the rural areas to the north and east. It does nowhere near that today. Another edge of market cluster is owned by Alpha and could be had for the right price, but that entire cluster didn’t bill what that one other edge of market station did 20 years ago. Sales haven’t gone up under the succession of new owners since, and each new owner paid more than the previous.

 

[davideduardo]

The pandemic, on the other hand, is not something anyone could've predicted. As others have mentioned, in-car listening went down to next to nothing.

Minor correction: It fell by about 45%. In-home listening increased, but not proportionally. Half of all listening now and pre-pandemic is not in cars.

 

[MarkW]

Plan confirmation hearing is currently scheduled for 2:30 PM Central Time on February 20:

https://document.epiq11.com/document/getdocumentbycode?docId=4279622&projectCode=AUD&source=DM

 

[TheBigA]

Here's more analysis on the Audacy bankruptcy:

Analysts Agree: Audacy Bankruptcy Stems From Overpaying For CBS Radio.

Audacy’s bankruptcy restructuring is likely to proceed much like earlier ones undertaken at Cumulus and iHeartMedia, with Tideline Partners’ Greg Guy saying, “The industry has been through this before.” Analysts

www.insideradio.com

 

[pjc1961]

And....
Audacy Retention Bonuses and David Field in non-Chairman capacity:

Audacy Doles Out Bonuses To Keep Executives Through Reorganization.

One of the risks during a bankruptcy is a brain drain scenario with senior management leaving a company during a reorganization. Audacy has moved to prevent that from happening, as

www.insideradio.com

 

[TheBigA]

In the cases of Cumulus and iHeart, the lenders chose to retain previous management. In this case, it really depends on what the new owners have in mind for fixing the company. the last two paragraphs of the article says:

Audacy may have arranged a prepacked reorganization with its debtholders, but some analysts have said one of the outstanding questions is whether the new owners will look for new leadership or retain the executives who have an intimate knowledge of the assets.

“We assume the banks, who will control the company, will likely install new management to continue running the Audacy radio stations and digital assets,” says Craig Huber of Huber Research Partners.

The problem with that is any new management would have a lot to learn, given the assets are so diverse and spread all over the country.

 

[Theater of My Mind]

And....
Audacy Retention Bonuses and David Field in non-Chairman capacity:

What a hero. Bankrupted the company. Give that man a bonus.

 

[lanceventa]

And....
Audacy Retention Bonuses and David Field in non-Chairman capacity:

Audacy Doles Out Bonuses To Keep Executives Through Reorganization.

One of the risks during a bankruptcy is a brain drain scenario with senior management leaving a company during a reorganization. Audacy has moved to prevent that from happening, as

www.insideradio.com

This is standard and also not new. I reported on this right after the Chapter 11 filing (The Audacy Bankruptcy: What’s Next? - RadioInsight).

 

[TheBigA]

What a hero. Bankrupted the company. Give that man a bonus.

I think you're misunderstanding the purpose. It's not meant as a reward. It's meant as a form of control. It shows them there's a new sheriff in town. On the other hand, the lenders could wipe everyone out and start from scratch. They view this as the cheaper alternative.

 

[davideduardo]

What a hero. Bankrupted the company. Give that man a bonus.

Field did not bankrupt the company. A unique and unpredictable set of circumstances caused the bankruptcy: the pandemic, a terrible advertising economy and a faster growth of the Internet for all kinds of entertainment and information.

None of the lenders saw that coming, and no business modeling technique could anticipate what was essentially a “perfect storm“. So, if anyone attempts to place blame, it starts with the lenders. And even then, the situation is so perfectly unique that it was not predictable.

 

[Kent]

What a hero. Bankrupted the company. Give that man a bonus.

I get that it's frustrating to the people who work there and to those of us watching. It's also somewhat counterintuitive from our standpoint. The problem, if you're the debtholders, is that you you need him to remain around through the bankruptcy process (and, possibly, until you find a replacement). You have to give him money (probably more than he deserves) to get him to steer the ship through all of this. If you don't, he'll probably just walk and leave you up a creek. I tend to think the new owners will replace him quickly, and, if they do, he won't likely work anywhere at that level ever again.

Field did not bankrupt the company. A unique and unpredictable set of circumstances caused the bankruptcy: the pandemic, a terrible advertising economy and a faster growth of the Internet for all kinds of entertainment and information.

Let's be realistic. Yes, there plenty of unique and unpredictable circumstances that contributed to this bankruptcy. Those weren't Field's fault. Having said that, taking on roughly $2 billion in debt is always going to be risky for a company of that scale and size, and taking on that much debt was never going to leave much room for error, even in the most optimistic scenarios. That's more money than most of us will ever see in our lifetimes, a lot more. The pandemic may have amplified the problems, but people were already spending less time per week with radio while the internet's share of ears was going up. The average age of the American radio listener was already going up. Just following those two trends to their logical conclusions should've given most anyone second thoughts. All bankruptcies and the circumstances behind them might be unique, but this situation is not unprecedented. Citadel did something similar for less money and in more optimistic times, and it went bankrupt. Hindsight may be 20/20, but Entercom/Audacy had plenty of reasons for pause before it did that deal. If Field had any concern about acquiring CBS Radio, he didn't show it.

None of the lenders saw that coming, and no business modeling technique could anticipate what was essentially a “perfect storm“. So, if anyone attempts to place blame, it starts with the lenders. And even then, the situation is so perfectly unique that it was not predictable.

I do agree with you when you say the lenders definitely have their share of the blame. The same signs I mentioned above were available to them, too, and they went ahead and lent the money. If anything, they should've had more information and actuarial data, which I can't imagine were rosey. Radio has always been a risky investment. Just ask one of the commercial radio station owners of 30 years ago how much he made.

 

[TheBigA]

Citadel did something similar for less money and in more optimistic times, and it went bankrupt.

Not exactly. Citadel did a similar reverse morris trust deal and the value was $2.7 million, which was more than the CBS Radio deal. Most observers would say Audacy got a lot better quality radio stations than Citadel. Then Cumulus bought Citadel & ABC for $2 billion, and it too went bankrupt. So all three of these deals were multi-billion, all three were with stations owned by one of the big 3 TV networks, and all three resulted in bankruptcy. Which is why there's no money around for anyone other than churches to buy radio stations.

Hindsight may be 20/20, but Entercom/Audacy had plenty of reasons for pause before it did that deal. If Field had any concern about acquiring CBS Radio, he didn't show it.

Because the general view at the time was these were quality stations, and Entercom was in the best shape financially and managerially to run them.

 

[boombox4]

Field did not bankrupt the company. A unique and unpredictable set of circumstances caused the bankruptcy: the pandemic, a terrible advertising economy and a faster growth of the Internet for all kinds of entertainment and information.

None of the lenders saw that coming, and no business modeling technique could anticipate what was essentially a “perfect storm“. So, if anyone attempts to place blame, it starts with the lenders. And even then, the situation is so perfectly unique that it was not predictable.

OK, no one could foresee the Pandemic, and the Pandemic economy coming. Got that.

But the other two factors? How could no one in Audacy (or any other radio company, for that matter) foresee the rise of the internet and its potential effect on the overall entertainment and information economy, as well as the effect of (practically) an infinite number of internet media outlets on advertising revenues? It's basic supply and demand, and with the internet, you've got massive supply, sometimes outstripping demand. Content creators have been aware of this since the early 2010's.

Why would radio, with its vast experience in delivering entertainment to the masses with platforms ranging from OTA to Satellite to online platforms like IHeart and Audacy, not see the internet effect coming?

 

[michael hagerty]

OK, no one could foresee the Pandemic, and the Pandemic economy coming. Got that.

But the other two factors? How could no one in Audacy (or any other radio company, for that matter) foresee the rise of the internet and its potential effect on the overall entertainment and information economy, as well as the effect of (practically) an infinite number of internet media outlets on advertising revenues? It's basic supply and demand, and with the internet, you've got massive supply, sometimes outstripping demand. Content creators have been aware of this since the early 2010's.

Why would radio, with its vast experience in delivering entertainment to the masses with platforms ranging from OTA to Satellite to online platforms like IHeart and Audacy, not see the internet effect coming?

My take, from eight years with iHeart (2012-2020)?

They saw it coming.

They thought, with that vast experience, that they were well positioned to lead and profit from this. Yeah, there'd be a (practically) infinite number of new outlets, but most would never gain traction and they figured they'd buy the ones that became a threat.

They intended to ride the tiger.

Tiger showed up hungry and in a bad mood.

 

[MarkW]

Field did not bankrupt the company. A unique and unpredictable set of circumstances caused the bankruptcy: the pandemic, a terrible advertising economy and a faster growth of the Internet for all kinds of entertainment and information.

None of the lenders saw that coming, and no business modeling technique could anticipate what was essentially a “perfect storm“. So, if anyone attempts to place blame, it starts with the lenders. And even then, the situation is so perfectly unique that it was not predictable.

He overpaid big time for CBS Radio.

A quote from the Inside Radio article:

"That deal never had a chance with that debt load,” said the anonymous broker. “At some point, the debt was going to have to be restructured, but COVID accelerated everything. It's just happening sooner rather than later.”

I agree 100 percent with the above viewpoint.

Yes, the lenders were complicit - and frankly - stupid.

 

[RadioGuy1864]

He overpaid big time for CBS Radio.

A quote from the Inside Radio article:

"That deal never had a chance with that debt load,” said the anonymous broker. “At some point, the debt was going to have to be restructured, but COVID accelerated everything. It's just happening sooner rather than later.”

I agree 100 percent with the above viewpoint.

Yes, the lenders were complicit - and frankly - stupid.

Adopting an old proverb to radio, "The quickest way to go broke in the radio business is to overpay for stations"

 

[TheBigA]

How could no one in Audacy (or any other radio company, for that matter) foresee the rise of the internet and its potential effect on the overall entertainment and information economy, as well as the effect of (practically) an infinite number of internet media outlets on advertising revenues?

The internet has destroyed many businesses, including brick & mortar retail and the music business. In fact the music business spent many years in the late 90s and early 2000s fighting and suing companies and individuals involved in file sharing. They are just starting to recover thanks to music streaming fees, which are also hurting the radio business. But you could say the same thing about all of the brick & mortar retail companies, such as Sears and Penneys, who have filed for bankruptcy in the last ten years.

With regards to Audacy specifically, they were among the most successful and profitable radio companies. Their stock was trading in the teens at the time of the sale. They had previously bought and absorbed other radio companies, including the Lincoln Financial group in 2014. So there was no reason to believe that Audacy couldn't handle this purchase. Their point is they could have, were it not for the pandemic.

He overpaid big time for CBS Radio.

Anyone who says that does so with the benefit of hindsight. If you go back to all of the financial media at the time, no one was criticizing the price. In fact, compared to previous radio deals, this one seemed to be a bargain. CBS was anxious to get rid of radio, and this was seen as a fire sale price. What I do agree with is the debt was structured in such a way that a big part of the principal was due in the first ten years. That was unsustainable.

 

[Theater of My Mind]

How could no one in Audacy (or any other radio company, for that matter) foresee the rise of the internet and its potential effect on the overall entertainment and information economy, as well as the effect of (practically) an infinite number of internet media outlets on advertising revenues?

Big Radio corporations are always the victims of circumstance and the executives never bear any responsibility for their actions that lead their businesses to fail.

That is the message from the dominant members of this site who constantly gaslight us with their posts to that effect.