CBS to sell all its radio stations - Seattle impact?

[Bongwater]

Nothing happening to iHeart has any affect on CBS. All of their stations are completely paid off with no debt. That's a very different problem.

And as I said, CBS is not "bailing" on anything. They're looking for shareholder value.

Using your logic, and considering the losses Viacom and Disney are experiencing due to cord cutting, CBS would be best to sell TV too.

There is no such thing as a safe business.

An iHeart collapse will be felt industry wide. And deep. And if all their debts were publicly audited, it would be a pretty bad number.

CBS and their other holdings would probably not want to be associated even indirectly with a long-term mess like that - especially if they want someone else to buy their stations.

But seeing as they announced selling off their radio division a week after the iHeartMedia revelation, don't tell me it didn't make enough of a wave to make CBS do this. They could have waited for a year, maybe two. Or even a few months. They chose now.

Of course they're looking for "shareholder value" (aren't they all?) But probably for different reasons than you might think.

 

[davideduardo]

That's just Corporate Chairman Speak 101. What was he supposed to say to all the shareholders?

The industry estimates that the cash flow of the CBS stations is in the $300 to $400 million dollar range. It's a classic "cash cow" but there is no growth in the industry that would stimulate stock price. What they are obviously exploring is whether they can deploy the underlying value of the assets somewhere that there is both good cash flow and measurable growth.

And Moonves was speaking to a group mostly made up of investment analysts, fund managers and such. Any one of them probably knows more about finance than he does, so there was no way to pull the wool over those guys' eyes. He was addressing the issue of prospects for growth, and saying that they were considering spinning or selling low-growth assets was something that analysts would want to hear.

This also later allows Moonves to come back and say something like "the prospects for near term continued cash flow are very good in radio and we feel that using the profits thus produced to finance future acquisitions is the best way to go". At that point the can say that the market would not yield desirable prices for the assets and, thus, the ROI on the underlying potential investment capital to be obtained at bargain prices would be less than simply keeping the properties."

CBS radio has no debt and huge cash flow. THe individual investor is not upset... but analysts and fund managers want to do projections for the future.

 

[davideduardo]

An iHeart collapse will be felt industry wide. And deep. And if all their debts were publicly audited, it would be a pretty bad number.

iHeart is "publiclly audited" in the sense that an independent auditor reviews and certifies its financials. The debt appears very clearly on its balance sheets.

CBS and their other holdings would probably not want to be associated even indirectly with a long-term mess like that - especially if they want someone else to buy their stations.

The underlying issue is that iHeart is not publicly held, as it was taken private. It's in the hands of investment bankers who financed the purchase. Before they let the whole thing go under, causing a loss of all the equity, they will work out settlements.

The issue here is too much debt, not the state of radio. Everyone in the financial and broadcast management fields understands this and there will be no folks jumping out of Wall Street windows over this.

But seeing as they announced selling off their radio division a week after the iHeartMedia revelation, don't tell me it didn't make enough of a wave to make CBS do this.

The issues are unrelated. CBS stations have no debt, and they have enormous BCF. iHeart stations have enormous BCF, but they have a huge debt burden. Nobody confuses the two.

This is like owning a house you bought when you had two earners in the family but now one is out of the job market and you can't meet the payments and after the recession the house is underwater. The house is still a good house and you want it, but you can't afford to pay it off, and selling it won't pay the loan. iHeart can't afford to sell as the values are underwater and can't pay the debt because the recession hurt revenue... both of which the industry has known for more than half a decade. So now the debtor and the creditors have to seek compromise.

They could have waited for a year, maybe two. Or even a few months. They chose now.

Even back to when Dan Mason was in charge, they announce they were going to thin the herd. All they are doing now is reiterating that they are open to explore the opportunities. Of course, they did not sell much of the smaller market inventory because they did not get a price that was attractive, given the profits they would sacrifice.

Of course they're looking for "shareholder value" (aren't they all?) But probably for different reasons than you might think.

They are looking where their capital will have the greatest returns. Given the uncertainties in new media and film, they certainly may find that the secure cash flow from radio is more valuable than burn capital for a new venture.

 

[TheBigA]

CBS and their other holdings would probably not want to be associated even indirectly with a long-term mess like that

And they're not. The iHeart problem isn't a radio problem. It's an equity problem. It doesn't sound to me like you understand business.

The timing for the announcement has to do with an investor call. That's when the announcement was made. It was Moonves first call following the retirement of Sumner Redstone, who owns most of the company stock.

But no, this has nothing to do with iHeart. And I'm not expecting the new owner to be an existing radio company.

 

[Radio-X]

But no, this has nothing to do with iHeart. And I'm not expecting the new owner to be an existing radio company.

Paul Allen? Jeff Bezos?

Allen has direct experience in the field. Bezos stated he wanted to buy media properties and already purchased the Washington Post...which is, as newspapers these days go, a pretty solid rag.

And you can't deny, both have the money to buy (at least the Seattle cluster) outright!

Radio-X

 

[TheBigA]

Paul Allen? Jeff Bezos?

OK, consider their money, and then consider that there are a whole lot of OTHER people in Seattle who shared in that wealth. We don't know their names, but they have billions of dollars. It's not about having the money, it's about having a vision. Paul, Jeff, and a few others were lucky to be young enough billionaires to still have energy to do something else. That's what it will take. I think Paul & Jeff are pretty busy with the things they're already doing. But there are hundreds of other tech billionaires sitting around right now.

One of the problems with radio is there's a mythology that radio stations don't create content. What Bezos liked about the Post was it's a content creation factory. Radio stations are very similar, but they've been badly run. So it will take someone to reinvent radio into content creation factories.

 

[Kelly A]

Paul Allen? Jeff Bezos?

Allen has direct experience in the field.

Huh? Paul Allen donated some money to KEXP years ago. You consider writing a check to a college station on par with having direct experience in the field?

 

[landtuna]

So it will take someone to reinvent radio into content creation factories.

Not being a smartass here but.....wasn't radio at one time the content creator to the world? At least the English speaking world. They gave it up to a new technology and now radio is adrift in a world of tens of new technologies so the odds that radio will "recreate" itself are that much smaller. But the media audience is a fickle entity. Get away from today's junk, lookalike presentations and back to what first made radio great and you might have a slim chance to bring it back. Not necessarily to the forefront of the mass audience but at least to a popular level.

The problem, as I see it from an outsider perspective, is sponsorship....or rather the lack of it. In the past there were companies like Jello who bought/owned radio time and they paid performers like Jack Benny to fill it. I don't see either the sponsors or the performers today. But if we did have them...say to appeal to the late teens and early adult audiences, there might be a chance. But if radio continues presenting today's copyboy content and lackluster presentations it will be just a footnote in history within the next decade or two.

 

[davideduardo]

Huh? Paul Allen donated some money to KEXP years ago. You consider writing a check to a college station on par with having direct experience in the field?

From The Oregonian 5-12-2009

"Paul Allen is selling his two Portland radio stations to a group led by former radio mogul Larry Wilson, who aims to make a fresh start in the business he left eight years ago.

The stations are talk-radio's KXL (AM 750) and all-sports KXTG ("The Game," 95.5 FM). They are among Oregon's best-known broadcasters by virtue of their association with outspoken radio personalities and popular sports teams, including the Portland Trail Blazers."

Allen had a definite and strong interest in radio. But I think it was most related to his interests in sports and various causes.

 

[TheBigA]

Not being a smartass here but.....wasn't radio at one time the content creator to the world?

Sure, but then TV came along. That was a long time ago.

Today, NPR is creating audio content and making it available on multiple platforms. That's the model that can work today.

 

[Kelly A]

Allen had a definite and strong interest in radio. But I think it was most related to his interests in sports and various causes.

Exactly, he invested in radio, both donation and ownership, but I wouldn't consider that exactly involved in the field either.

 

[landtuna]

Sure, but then TV came along. That was a long time ago.

I know. I was there. But what I was thinking, if I didn't say it, was that radio has two big advantages over the visual media - you can enjoy it with your imagination AND you can enjoy it while doing something else. I'm guessing that is one big reason that music radio is predominate today. But it could be much more than that. But not if radio takes the same "create" path that TV has taken - copying successful programs from foreign markets. During my youth we used to criticize the Japanese for being the copycat artists of the world. Now, at least in the TV entertainment industries, we are the world's biggest copycats.

Today, NPR is creating audio content and making it available on multiple platforms. That's the model that can work today.

Not to the level I am referring to. I see NPR as appealing to college educated "highbrow" young and middle-aged adults and not the mass audience that typical sponsors desire.

 

[TheBigA]

I see NPR as appealing to college educated "highbrow" young and middle-aged adults and not the mass audience that typical sponsors desire.

Imagine mass audience content using multiple platforms, combined with some unique promotions and contests.

 

[landtuna]

Imagine mass audience content using multiple platforms, combined with some unique promotions and contests.

My extended family might be non-typical but the only radio we listen to is while in the car (they on local FM and me on HD2) and me while I am on the PC (streaming out of market). No one listens to the radio in the house. Everyone has a smartphone but no one listens to the radio on it. Some have personal libraries and others use Pandora or another music service.

I have 4 favorite non-sports shows I watch weekly - one local morning show and three network shows. My wife watches a dozen or so (time shifted). No one else watches anything regularly. When asked, they mention spending time on YouTube and similar sites or movies (streamed or DVD). I am retired but everyone else works so they have far less time to spend with various media.

One son, many years ago, was the only person ever interested in contests. He even won one of them once. No one else has ever paid any attention to promotions or contests.

In our house anyway breaking through the above situation with "compelling" content will be most difficult. Only one person out of a dozen is even interested in what TV is offering (but only if the commercials have been stripped out) and she isn't interested in radio at all - not even as background noise.

 

[TheBigA]

Some have personal libraries and others use Pandora or another music service.

If all they want to do is listen to pre-recorded music, there's nothing radio can do, including bring back radio drama or Jack Benny, that will attract them. This is not a content issue at all. BTW, there has always been a percentage of the population that was not interested in radio, even during your era. If they want their favorite songs and nothing else, there have always been devices that provide that, going back to 1910. But those online services don't create content, they simply provide access to someone else's content. That's why they pay such stiff royalty rates to get it.

 

[AQH]

I see NPR as appealing to college educated "highbrow" young and middle-aged adults and not the mass audience that typical sponsors desire.

It's not so much socioeconomic, it's about who gives a rip anymore about long form news/talk. CBS and others could invest in doing the same, but revenue being what it is now, it doesn't make business sense.

Imagine mass audience content using multiple platforms, combined with some unique promotions and contests.

Of the big name owners, CBS Radio is the only one that took the other platforms seriously. Yes Clear Channel did it, but that was more out of the need to create another revenue stream and done slapdash. CBS is the one who seems to have taken the time and investment in getting things right. Neither are perfect, but better than say five or six years ago.

 

[TheBigA]

CBS is the one who seems to have taken the time and investment in getting things right. Neither are perfect, but better than say five or six years ago.

There is a movement for more radio companies to invest in other platforms, because quite honestly, there is no growth on air. Ad rates aren't increasing, and listeners won't allow more commercials. If these companies want to increase revenues, the only place it will come from is off air.

CBS has a unified approach that has worked well. That's why it will be difficult to extricate radio from their overall package.

 

[Kelly A]

Looks like BigA got this one right. Here is Les clarifying the intent to spin-off radio as a separate entity: http://radioink.com/2016/04/13/what...paign=THURSDAY+04-14-16+Leslie+Whittle+(Copy)

 

[TheBigA]

The problem the new entity will have is that it will be faced with a lot of the same issues other stand-alone radio entities have, which means to me that they can't continue to operate at the level of staffing and service they have now, unless some arrangement is made with the mother ship. That's what has been discovered by the radio-only companies that bought CBS Radio stations over the past few years. CBS Radio as a stand-alone will not be the same company it has been in terms of staffing and service.

 

[ChocoMingo]

Rumor has it that Infinity Radio is coming back for the 2nd time, maybe the 3rd?