Audacy Filed For Bankruptcy

[TheBigA]

BTW some of the streaming operation have negative cash flow, but the OTA networks keep on promoting them, because IMHO: Anything related to "digital" gets a "pass" from Wall Street.

Wall Street likes technology. Radio used to be owned by technology companies like RCA, Westinghouse, and General Electric. Once they sold out, radio has been owned mainly by radio-only companies.

The big streaming music companies are either owned by technology companies or they're foreign. Nobody knows if YouTube is profitable because its financials are buried in a trillion dollar conglomerate. The big media companies are battling over streaming right now. Disney may be big, but Apple is bigger. You need a big wallet to play in this game.

CBS lined up a Billion to "off set radios revenue". If the radio division was losing money, who would finance a money lossing operation?

Obviously somebody did. Then again nobody knew CBS Radio was losing money until Les Moonves started blabbing about it. CBS used its assets to sign for that loan. Then Entercom came in with very solid financials. Sometimes lenders will loan money with the intent of foreclosure. That way they get some money up front, but they also get the assets. The stock price isn't what killed Audacy. Ultimately, the lenders saw a way to take valuable assets away from the family that was running them.

 

[Kent]

Let me repeat: CBS wanted to get rid of radio. They started in 2005 by selling off smaller markers, like Buffalo and Kansas City. BTW the companies that bought those stations (Regent and Steel City) went bankrupt. In 2015, the plan was to spin off radio into its own company. But if that had happened, that company would have gone bankrupt. So this situation, in my view, was inevitable.

Absolutely. One quick correction, though: Steel City didn't buy the Kansas City stations from CBS. Wilks Broadcasting did and sold that cluster to Steel City several years later. Steel City paid about as much for that cluster as Entercom did for all of Lincoln Financial Media. That it went bankrupt after that wasn't much of a surprise. It overpaid by volumes. Aside from Carter Broadcasting and Union, every major commercial secular broadcaster in Kansas City is either going through bankruptcy or has gone through it in the last ten years. I don't count Alpine Broadcasting or the handful of AM Spanish-language stations that don't get many listener as major broadcasters.

Contrary to what Wall Street thinks, there is money to be made in Radio. There are industries that would love to have the EBDITA profit percentage rate radio has. Any business that is leveraged where everything to go perfect is subjected to failure the next economic downturn.

There will always be a market for traditional radio, though it might not always be on the public airwaves. People will always want an easy way to listen to their favorites. It's just not as many people and not as often as it used to be.

CBS lined up a Billion to "off set radios revenue". If the radio division was losing money, who would finance a money lossing operation?

People who thought another operator would be able to make it work.

BTW some of the streaming operation have negative cash flow, but the OTA networks keep on promoting them, because IMHO: Anything related to "digital" gets a "pass" from Wall Street.

The OTA networks keep promoting them because that's where the audience is going. They want to keep their audience within their ecosystem rather than lose them to someone else. As Michael Hagerty mentioned, they've known what's coming for a long time.

 

[secondchoice]

People who thought another operator would be able to make it work

Getting a billion dollars financed for a "turn around" is questionable. There had to be positive cash flow unless the lenders are stupid.

Most radio station sales price use to be either a multiple of sales or EBDITA, useless there is a tremendous upgrade construction permit.

 

[TheBigA]

Getting a billion dollars financed for a "turn around" is questionable. There had to be positive cash flow unless the lenders are stupid.

We've talked about two different loans, the original one, and the refinance a few years later. Different lenders as well.

 

[Kelly A]

Getting a billion dollars financed for a "turn around" is questionable. There had to be positive cash flow unless the lenders are stupid.

Most radio station sales price use to be either a multiple of sales or EBDITA, useless there is a tremendous upgrade construction permit.

Broadcast sales used to be based on a multiple of 'Broadcast Cash Flow' or BCF (Revenue Minus Expenses). BCF does not usually include corporate costs. That sales multiple was usually 2X or 3X, but in the late 90's some groups of stations set records paying at 7-10X BCF.

 

[Kent]

Getting a billion dollars financed for a "turn around" is questionable. There had to be positive cash flow unless the lenders are stupid.

We're still talking several clusters that billed north of $100 million a year. The lenders likely figured the right operator could get the margins under control. Having said that, of course, the lenders were stupid (unless they wanted to eventually operate those properties themselves). The textbook definition of a stupid investment is one that doesn’t return. Keep in mind, also, that, when the investors are private equity firms, they’re not typically spending their own money, or at least not all of it. Private equity firms making money on investments that go bankrupt is fairly common. As PT Barnum said, “There's a sucker born every minute.” Private equity firms are adept at finding them.

 

[radiofan2023]

Aside from Carter Broadcasting and Union, every major commercial secular broadcaster in Kansas City is either going through bankruptcy or has gone through it in the last ten years. I don't count Alpine Broadcasting or the handful of AM Spanish-language stations that don't get many listener as major broadcasters.

Union also has/had investment in 810 Zone restaurants, which may have helped them. Carter isn’t all secular since they have KPRT.

 

[davideduardo]

Why do you thino those legacy CBS people sold their stock? They could see the management differences between Skippy and Dan Mason. One is way over his head and will never fill his daddy's shoes, and the other genuinely cared about radio, and the employees and listeners who made the market possible.

Wrong. CBS Corporation investors saw a no-growth industry, radio, while they were mostly interested in the parent operation... the one that spun CBS radio off. They realized Moonves' successors were getting rid of non-core assets, and they wanted no part in the radio side alone.

And, at the time of the sale, the bulk of CBS Corporation equity was owned by mutual funds and institutional investors; there were very few "legacy CBS people" holding a significant share of the stock.

Actually, CBS radio was on the downside of its peak, while Entercom was growing and much better run.

 

[boombox4]

The OTA networks keep promoting them because that's where the audience is going. They want to keep their audience within their ecosystem rather than lose them to someone else. As Michael Hagerty mentioned, they've known what's coming for a long time.

True, the OTA networks undoubtedly promote the streams because it will keep listeners from using Pandora and Spotify instead. The OTA station/network has to promote the stream. That way -- hopefully for the radio company -- listeners will stick with the radio company's stream. In a decade or two, we'll see how that works out for them.

In online content marketing, visibility is everything.

 

[secondchoice]

Spotify* has horrible margins 1.94% or $65 million on 3.3 billion EU. Then again like construction permits in the past for FM move ins in the past, there is excitement over their “AI” personal DJ service. I remember Pandora was a “hot” stock and that didn’t turn out too well for shareholders.

*spotify stock price - Google Search

Like I said OTA radio has decent margins. The inflated station prices created by Clear Channel and friends is coming back to haunt the industry. If a high percentage of radio stations were not profitable when station ownership limits were raised the commission
should have let the "natural economics" take effect and stations go dark until (or if ever) someone could run those stations at a profit. I get the "clusters" should have been allowed for economy in sub 50 markets, but the total number of stations one operator should have been limited to 8 or 12. If an operator can not run 2 or 3 clusters and make a profit what makes anyone think those same operators would do better with 50.

 

[Kelly A]

Like I said OTA radio has decent margins.

Depending on market size and clusters, 10-40% Radio’s Digital Revenue Keeps Growing. But How Profitable Is It?

The inflated station prices created by Clear Channel and friends is coming back to haunt the industry.

It wasn't just Clear Channel. Before the 2008 Recession, many groups way overpaid for stations and then went public. Clear Channel was just the largest at the time.

 

[TheBigA]

If an operator can not run 2 or 3 clusters and make a profit what makes anyone think those same operators would do better with 50.

The profitability of the clusters was not the problem. The problem was the debt. Any ad-supported media needs a national platform to compete. Advertisers want big numbers. So having the scale of 400 stations makes buying ads more efficient. On the other side, the people need someone to own these radio stations. The idea of small local owners from 50 years ago doesn't work now. Nobody wants to own radio stations. They're competing with nig tech companies that have no limits.

This is why the Audacy lenders are so happy with this bankruptcy. They get a huge cash cow that will now have little debt, and they're getting rid of the family that built it. It's like they helped you build a big beautiful house, you pay a few years of interest & principle, and then they foreclose and kick you out. You get nothing, and the banks get money & your house.

 

[Kent]

Union also has/had investment in 810 Zone restaurants, which may have helped them.

Could be. Restaurants typically only have margins of around 4%, though. I know, at one point, 810 Zone was a partnership with KC Hopps. It's not on the KC Hopps website anymore, though, so I don't know if it's still affiliated with them. I know the one on the Plaza closed several years ago, and I'm not sure if the Lee's Summit location is still around. The Leawood location is still around, or was a few months ago. As you probably know, Union is also involved in a few other sports radio stations, including Wichita and Louisville. Guessing those make pretty good money, too, and I believe those were bought a lot cheaper than when they had to buy Jerry Green's family out of WHB (which they paid for by selling their FM to EMF).

Carter isn’t all secular since they have KPRT.

Fair. I seem to remember KPRT getting the bulk of its money from advertisers rather than paid preachers, though I rarely ever listened to it. Didn't listen to KPRS much either for that matter.

True, the OTA networks undoubtedly promote the streams because it will keep listeners from using Pandora and Spotify instead. The OTA station/network has to promote the stream. That way -- hopefully for the radio company -- listeners will stick with the radio company's stream. In a decade or two, we'll see how that works out for them.

It wouldn't seem to be working out too well for them so far, though the TV networks might be having better luck than the radio stations. I don't know how serious it is, but I've been seeing reports for at least the last year about one of the TV networks being interested in dumping its O&O's and shifting to a distribution and online model. Radio also didn't benefit from being several years behind when it came to streaming. The big radio operators knew what was coming, but they took several years to develop any sort of strategy. CBS Radio had a policy against streaming altogether until around 2006, and Clear Channel didn't start shifting its stations to iHeartRadio until around the same time. Streaming anywhere outside of the home or another fixed location like a hotel room was impossible until I got my iPhone in 2009, and, even then, only the largest broadcasters had any sort of sizable presence. Only a handful had their own apps. iHeartRadio was nothing but streaming the on-air product until about 2012. Pandora had quite-a-bit of a head start, and Spotify had already launched in the US, at least as a beta, by the time iHeart offered curated stations and on-demand content. TuneIn didn't become a thing until around 2011, and it only offered a paid app for several years before introducing the free version. I ultimately bought it around the holidays that year when the App Store ran a half-price special on certain paid apps. I got for $0.99 when it was regularly $1.99.

In online content marketing, visibility is everything.

If radio had gotten out in front sooner, it would've had all the visibility it needed. It's a common problem. The situation isn't all that different from retail. Sears may be the most successful business ever to use the mail order catalog, but it got behind on the internet and squandered its lead to an upstart called Amazon. The other brick and mortar retailers have suffered similar fates, though most of the large retailers are still profitable and are still playing catch up. At least most of them can sell immediacy, which Amazon can't or won't unless you pay high shipping charges. The record labels, by the way, made a similar mistake. They had been approached about selling individual tracks online in the mid-to-late 90's and pretty much laughed that person out of the room saying no one was going to buy $1.00 individual tracks when they could have a whole album. We know what happened after that.

 

[gr8oldies]

True, the OTA networks undoubtedly promote the streams because it will keep listeners from using Pandora and Spotify instead. The OTA station/network has to promote the stream. That way -- hopefully for the radio company -- listeners will stick with the radio company's stream. In a decade or two, we'll see how that works out for them.

In online content marketing, visibility is everything.

The OTA networks leave affiliates out in the cold.

 

[radiofan2023]

Could be. Restaurants typically only have margins of around 4%, though. I know, at one point, 810 Zone was a partnership with KC Hopps. It's not on the KC Hopps website anymore, though, so I don't know if it's still affiliated with them. I know the one on the Plaza closed several years ago, and I'm not sure if the Lee's Summit location is still around. The Leawood location is still around, or was a few months ago.

The Leawood 810 Zone closed in May 2016 and moved to 135th Street, then that one closed in 2018:

https://www.kansascity.com/news/business/biz-columns-blogs/cityscape/article215504235.html

Now the Leawood one is a Restoration Hardware.

Maybe you're thinking of Paddy's across the street or Houlihan's?

Also regarding streaming - some stations jumped on the bandwagon early in the mid to late 1990s. I listened to a music station from the UK online in 1998, and there were US stations that were streaming a few years before that.

 

[Kent]

The Leawood 810 Zone closed in May 2016 and moved to 135th Street, then that one closed in 2018:

https://www.kansascity.com/news/business/biz-columns-blogs/cityscape/article215504235.html

Now the Leawood one is a Restoration Hardware.

Maybe you're thinking of Paddy's across the street or Houlihan's?

I probably saw the building while passing by and didn't pay attention to the sign. I'm usually more focused on the road when driving in that area. I used to have lunch there occasionally with a friend from high school, but I think the last time we got together there was about a dozen years ago. She's since moved to Virginia.

I know KC Hopps has made a lot of changes over the last 10 years or so. I used to have my mug on the wall at 75th Street Brewery, which is now gone, and would hang out with the Mix 93.3 crew there once-in-awhile. Tried many times, but never could get on commercial radio in that market. I suppose something that can be said for that market is that people tend to be able to stay there for a long time.

 

[radiofan2023]

I probably saw the building while passing by and didn't pay attention to the sign. I'm usually more focused on the road when driving in that area. I used to have lunch there occasionally with a friend from high school, but I think the last time we got together there was about a dozen years ago. She's since moved to Virginia.

I know KC Hopps has made a lot of changes over the last 10 years or so. I used to have my mug on the wall at 75th Street Brewery, which is now gone, and would hang out with the Mix 93.3 crew there once-in-awhile. Tried many times, but never could get on commercial radio in that market. I suppose something that can be said for that market is that people tend to be able to stay there for a long time.

Unless you royally screw up like Kevin Keitzmann did. And some stay on air way longer than they should, in my opinion. I listened to Walt Bodine's last show live, and I felt bad for him. He had two cohosts who had to repeat their questions to him since he couldn't hear, and he was blind.

 

[TheBigA]

A reminder that this is the national radio board. Not local geography board.

 

[boombox4]

Could be. Restaurants typically only have margins of around 4%, though. I know, at one point, 810 Zone was a partnership with KC Hopps. It's not on the KC Hopps website anymore, though, so I don't know if it's still affiliated with them. I know the one on the Plaza closed several years ago, and I'm not sure if the Lee's Summit location is still around. The Leawood location is still around, or was a few months ago. As you probably know, Union is also involved in a few other sports radio stations, including Wichita and Louisville. Guessing those make pretty good money, too, and I believe those were bought a lot cheaper than when they had to buy Jerry Green's family out of WHB (which they paid for by selling their FM to EMF).



Fair. I seem to remember KPRT getting the bulk of its money from advertisers rather than paid preachers, though I rarely ever listened to it. Didn't listen to KPRS much either for that matter.



It wouldn't seem to be working out too well for them so far, though the TV networks might be having better luck than the radio stations. I don't know how serious it is, but I've been seeing reports for at least the last year about one of the TV networks being interested in dumping its O&O's and shifting to a distribution and online model. Radio also didn't benefit from being several years behind when it came to streaming. The big radio operators knew what was coming, but they took several years to develop any sort of strategy. CBS Radio had a policy against streaming altogether until around 2006, and Clear Channel didn't start shifting its stations to iHeartRadio until around the same time. Streaming anywhere outside of the home or another fixed location like a hotel room was impossible until I got my iPhone in 2009, and, even then, only the largest broadcasters had any sort of sizable presence. Only a handful had their own apps. iHeartRadio was nothing but streaming the on-air product until about 2012. Pandora had quite-a-bit of a head start, and Spotify had already launched in the US, at least as a beta, by the time iHeart offered curated stations and on-demand content. TuneIn didn't become a thing until around 2011, and it only offered a paid app for several years before introducing the free version. I ultimately bought it around the holidays that year when the App Store ran a half-price special on certain paid apps. I got for $0.99 when it was regularly $1.99.



If radio had gotten out in front sooner, it would've had all the visibility it needed. It's a common problem. The situation isn't all that different from retail. Sears may be the most successful business ever to use the mail order catalog, but it got behind on the internet and squandered its lead to an upstart called Amazon. The other brick and mortar retailers have suffered similar fates, though most of the large retailers are still profitable and are still playing catch up. At least most of them can sell immediacy, which Amazon can't or won't unless you pay high shipping charges. The record labels, by the way, made a similar mistake. They had been approached about selling individual tracks online in the mid-to-late 90's and pretty much laughed that person out of the room saying no one was going to buy $1.00 individual tracks when they could have a whole album. We know what happened after that.

Being that streaming in general didn't become a massive deal until after 2010 (it had some adherents before then, but didn't become the increasingly dominant audio entertainment medium until after 2012 or so, at least according to the RIAA), I personally don't think radio dropped the ball.

After all, the 2008 recession hit radio hard, and it takes money to build digital streaming platforms, and the fact that neither Pandora nor Spotify made any profit probably didn't induce radio into seeing that immediate action needed to be taken.

I don't think that the streaming audio marketplace will really come into its own until the 2030's, when FMs may start to pull the plug. A lot can happen in 15 years. And as BigA has said before concerning this subject, consumers like the cost of free, and FM radio is free, and always will be. Streaming? perhaps not. Especially if digital royalties go up again.

RE: The record labels mistake: One could argue that their mistake was going along with the 99 cent MP3 single, being that their revenues nosedived after that. The 99 cent MP3 single killed the album, and by 2019 that cut their revenues roughly 40% from where they were in 1999. Of course, after Napster, the writing was on the wall. MP3's and file sharing of some sort was here to stay, and the 99 cent single was designed to counter that (and make Apple a lot of money).

 

[TheBigA]

The record labels mistake: One could argue that their mistake was going along with the 99 cent MP3 single, being that their revenues nosedived after that.

That wasn't the record labels. That was Apple iTunes. The record labels hated it. They tried to get Apple to stop. But the real problem wasn't the price. The real problem was that people wanted music for free. Once people found out that could stream every song for free without buying it, that was the end. The record labels don't make money from record sales anymore. It's mostly from streaming. People get music for free, and the streaming companies have to pay the royalties. That's the mistake, because the streaming companies are losing money. So now the whole music business is built around getting people to stream music, and thats drawing listeners away from radio. Why listen to radio when I can hear what I want for free?