Connoisseur Media to acquire Alpha Media

[Rusty Muck]

I wonder how soon they'll ditch those small-market stations, and at what price. Most of the Missouri stations are in areas with slow growth at best, and often with declining agricultural economies. No longer is there anything to distinguish them from any other run-of-the-mill small-market radio station.

Honestly, when speaking of Canton, I don't know who would want that duop. 1480 is an aging AM that at least has the Guardians, Cavs, Browns and Buckeyes, and 94.1 is a standalone FM that has to compete against iHeart and Rubber City (whose signals reach Canton).

They may be stuck with those two along with the other stations that were decimated by Alpha's budget incinerations. What ROI is to be had by buying a forgotten AM in the middle of Missouri with no staff, no identity and no budget?

 

[davideduardo]

Given how badly Alpha decimated staff at other markets, it's a miracle WHBC didn't take on a all-podcast format with no staff. But what really can be done with a high-powered high-band AM that is lucky to be as generously staffed as they are?

Except that WHBC is not "high powered high-band". It is definitely about as high on the band as you can get, but it is only 15 kw daytime and a very directional 5 kw at night with a rather limited coverage area. The usable daytime 10 mV/m does not even cover Akron well.

https://fccdata.org/?lang=en&facid=4489

 

[EricStein]

You should be very concerned. One of the Alpha stations being bought is KINK-FM in Portland. A heritage AAA station.

KINK seems/seemed out of place even at Alpha (as its run as "Citadel II" and during/after the bankruptcy), being a station with local personalities targeting a more "progressive" audience.

 

[K.M. Richards]

I wonder how soon they'll ditch those small-market stations, and at what price.

Back when my New Mexico client was running the old Stolz stations remotely for the trustee pre-bankruptcy, they asked me to do a market profile on Palm Springs, because if there was a good chance of operating that station as a standalone without going into the red they were interested in bidding on it.

Without going into great detail, the bulk of the local radio buys are to Spanish-language stations that are co-owned with the Spanish-language TV stations. Latinos are the year-round dominant demographic there, augmented -- at least until this year -- by the "snowbirds" who spend winters there instead of in Canada. And they don't listen much to local radio.

During the six months from late spring to early fall, you could offer a buck per spot to the local English-language radio stations and they'd probably take it.

My bet is on Connoisseur ditching the Alpha cluster in that market, despite their calling it a "major market in the portfolio".

 

[EricStein]

Back when my New Mexico client was running the old Stolz stations remotely for the trustee pre-bankruptcy, they asked me to do a market profile on Palm Springs, because if there was a good chance of operating that station as a standalone without going into the red they were interested in bidding on it.

Without going into great detail, the bulk of the local radio buys are to Spanish-language stations that are co-owned with the Spanish-language TV stations. Latinos are the year-round dominant demographic there, augmented -- at least until this year -- by the "snowbirds" who spend winters there instead of in Canada. And they don't listen much to local radio.

During the six months from late spring to early fall, you could offer a buck per spot to the local English-language radio stations and they'd probably take it.

My bet is on Connoisseur ditching the Alpha cluster in that market, despite their calling it a "major market in the portfolio".

The big question is who would want to buy the former Digity stations? A lot of them are in small, low-billing, undesirable markets (like Southern Minnesota, for example) which were decimated by the Alpha cuts (and I would guess Connoisseur doesn't want to keep them). I'm pretty sure that K-Love already has a presence in these smaller markets, even if the Alpha signals are better than their own.

 

[Theater of My Mind]

You should be very concerned. One of the Alpha stations being bought is KINK-FM in Portland. A heritage AAA station.

I don't live in Portland so I'm actually not very concerned. But KINK-FM is a top-5 ranked station, and the highest rated Alpha station in the market. I'd be surprised if Connoisseur blows that up.

 

[mer764KC]

Given how badly Alpha decimated staff at other markets, it's a miracle WHBC didn't take on a all-podcast format with no staff. But what really can be done with a high-powered high-band AM that is lucky to be as generously staffed as they are?

At least WIBW isnt going be affected by this change... right? Right? Welp.

 

[TheBigA]

The RadioInsight story is being constantly updated with new details. From that, here's more about the financing:

Guggenheim Securities is serving as exclusive financial advisor to Alpha, with legal counsel provided by Wiley Rein. Connoisseur is being advised by McDermott, Will & Emery and Wilkinson Barker Knauer, with transaction financing from Brigade Capital Management.

So congrats to Jeff on finding people who are still willing to lend money to broadcasters.

Wiley Rein is a heritage DC law firm, founded by former FCC Chairman Richard Wiley. It's well-connected and should be able to work this through the regulatory machine.

The other law firm, Wilkinson Barker Knauer, includes David Oxenford among their team. He writes BroadcastLawBlog, so we're all familiar with him.

 

[Barry]

Do the Alpha stations have some strong personalities or shows that Connoisseur may want to rebroadcast on its existing stations in Connecticut and Long Island?

 

[TheBigA]

Do the Alpha stations have some strong personalities or shows that Connoisseur may want to rebroadcast on its existing stations in Connecticut and Long Island?

Good question. Neither company is really set up to do that kind of thing. But I'm sure they'll be looking for ways to economize.

 

[Kent]

I don't know how many clusters that is, But if I had to manage all that somehow, I'd be in the funny farm in a week. It takes personal attention to make even ONE radio station work (ask SomeRadioGuy,)

I believe Festus and Farmington are run together as are Cameron and Bethany. So, she'd be in charge of four clusters in the state if I remember that correctly as Lebanon and Moberly are run separately. As I mentioned, she doesn't have much, if any, programming staff to manage. So, I suppose she has that going for her, but I wouldn't want her job. Trying to get better margins out of those clusters with no support sounds like being set up to fail. At one point, the Moberly cluster billed roughly $3 million in a single year. It probably hasn't done that in quite awhile, but it's not going to do it with no staff and no high school sports show. The programming was always hokey, but it always made money under Shepherd.

I wonder how soon they'll ditch those small-market stations, and at what price. Most of the Missouri stations are in areas with slow growth at best, and often with declining agricultural economies. No longer is there anything to distinguish them from any other run-of-the-mill small-market radio station.

You're not the only person I know who has asked that question in the last three hours or so. I'm sure Alpha has plenty of markets Connoisseur would like to get rid of, but I can't imagine anybody would want most of those small market Missouri stations. It might've had a prayer a year ago before it nuked the staff and the high school sports show that was making it money, but we're still talking about small market stations with no tangible assets. The towers were sold a long time ago, and just staying on-air requires several thousand a month to cover the tower rent. I know someone who was interested in Moberly and Lebanon but balked when he saw how much just staying on-the-air would cost every month. Most people think Connoisseur will be a major upgrade. I tend to agree as being worse than Alpha, especially after last year, would take some serious effort.

 

[garfradio]

Lot of questions here in this deal.

First thing is the price for the acquisition. Supply & demand economics applies here. Does anyone remember when Alpha (then L&L) bought the Triad stations (checks the date) 13 years ago? Back then it looked like Alpha got an incredible deal as the Triad investors just wanted out. Doesn't this seem like that kind of deal?

(CONJECTURE HERE) Connoisseur is going to roll up another group or two quickly. 2025 economics of radio (really any legacy media today) demands scale & ability to leverage talent (on-air, programming, sales, management, digital) across markets.

There is money to be made, but it's almost certainly going to be made by consolidating & cutting costs faster than industry revenue stagnates (flat revenue + increasing costs in many budget areas). Not a pretty picture for locally focused broadcasters (and most/all readers of this forum). This is the playbook for private equity type deals in all mature industries.

Covering 20% of the nation and being a top 10 group owner is all fine & good but it's not going to be big enough to be a difference maker in 2025 and beyond.

The press release talks about live & local, and the current Connoisseur stations have been more live/local than most groups today. But how much of that can they really afford to do now across the merged group? They will likely select a few strategic places to invest in local content. It's unlikely the resources are available to do it significantly across the group immediately.

(MORE CONJECTURE) They will shed the small unrated markets that add complexity to an already difficult operational challenge. The unrated markets are a significantly different business than the PPM markets and the diary markets.

IF they take that step, it's probably at close to fire sale prices. There some skilled operators in those unrated markets. How many of them are looking to take on a renovation project across 15+ markets? Or even take on a just a few of them?

Overall, this move is a net positive for the Alpha stations & the radio industry. However look at it through the lens of what's doable today.

Key fact here is that private equity investors (meaning Brigade Capital, who are mentioned in the press release as the money behind the deal) always expect a very healthy payday within 5-ish years.

 

[radiofan2023]

You're not the only person I know who has asked that question in the last three hours or so. I'm sure Alpha has plenty of markets Connoisseur would like to get rid of, but I can't imagine anybody would want most of those small market Missouri stations.

What about Regional Media-Virden, they bought KVIL and KNIM a few years ago.

 

[lanceventa]

(CONJECTURE HERE) Connoisseur is going to roll up another group or two quickly. 2025 economics of radio (really any legacy media today) demands scale & ability to leverage talent (on-air, programming, sales, management, digital) across markets.


(MORE CONJECTURE) They will shed the small unrated markets that add complexity to an already difficult operational challenge. The unrated markets are a significantly different business than the PPM markets and the diary markets.

This is 100% everything I've heard since I first reported on the pending sale in March...

 

[davideduardo]

Without going into great detail, the bulk of the local radio buys are to Spanish-language stations that are co-owned with the Spanish-language TV stations. Latinos are the year-round dominant demographic there, augmented -- at least until this year -- by the "snowbirds" who spend winters there instead of in Canada. And they don't listen much to local radio.

Most "snowbirds come from Oregon, WA, ID, MT, AK, the Dakotas and MN. There are a lot from IL, IA, and even the Plains States. And the domestic snowbirds far outnumber the Canadian ones.

Most of the Canadians are from Alberta and Saskatchewan, and most of them are landowners who had big farms that were sitting on top of various types of oil deposits. They are amazingly wealthy, and all the ones living near me are back again this year.

During the six months from late spring to early fall, you could offer a buck per spot to the local English-language radio stations and they'd probably take it.

I know a number of station owners. There is a huge radio market for Hispanics who don't listen to Spanish language radio as that community is long-established and the majority don't speak Spanish, although their grandparents did.

There is also a station specifically targeting the gay community and it does well enough to be in expansion mode.

While there are too many stations, the good ones bill well all year long. The market is now 500 thousand people who are permanent residents. While 15 years ago, half my neighbors were gone in the summer, now nearly all are here year-round. The main reason why those with "lots of money" leave in the summer is to avoid being California residents and paying the nation's highest income taxes.

My bet is on Connoisseur ditching the Alpha cluster in that market, despite their calling it a "major market in the portfolio".

The several "big" clusters do very well. It all depends on their bottom line, but if you have 4 or 5 FMs you are going to be making decent money all year long. The advertisers who target snowbirds don't use radio or local TV at all. What makes it a better market than, let's say, Spokane, is that the average household income is so extremely high.

 

[Barry]

(CONJECTURE HERE) Connoisseur is going to roll up another group or two quickly. 2025 economics of radio (really any legacy media today) demands scale & ability to leverage talent (on-air, programming, sales, management, digital) across markets.

Might it make sense for Connoisseur to make another try at acquiring Cumulus? A couple of years ago, they offered around $15/share. Now Cumulus is trading at around 12 cents per share.

 

[garfradio]

Might it make sense for Connoisseur to make another try at acquiring Cumulus? A couple of years ago, they offered around $15/share. Now Cumulus is trading at around 12 cents per share.

Mmmmaybe. The existing debt at Cumulus is the challenge for making a deal happen, more than the stock price.

The capital company behind the Connoisseur deal does work with distressed debt, so if they can buy up enough of the bonds at the right price, sure.

Here's the tricky thing about Cumulus for an operator that is looking to add reach: the majority of their full clusters are in medium & small markets.

In the biggest markets, Cumulus has a bunch of one-and-two-offs: They crapped out in NYC. Chicago is 2 FMs and a 1 share AM. LA, less than 1 share AM. SF, an FM/AM simulcast, an FM & an AM. Washington, an FM & a less than 1 share AM. Houston, 1 FM. I think Dallas is the only Cumulus top ten market with a full-ish cluster. Atlanta's close with 3 competitive FMs.

A deal like that probably involves some swaps with other groups to give up some markets to bulk up in others.

 

[Kent]

What about Regional Media-Virden, they bought KVIL and KNIM a few years ago.

Your guess is as good as anybody else's at this point. Alpha unloaded the Clinton, MO stations to Radford, and that was a name I had never heard before. So, if anyone does step up to buy those stations, it might well be someone we've never heard of. I can tell you, however, that Alpha's Missouri stations have been for sale since before COVID. That tells me most everyone already operating who might be interested has passed at least once.

For the right price, Connoisseur could, however, probably find a buyer. The person who told me off the record he would be interested in some of the Cumulus stations that were taken silent a couple months ago would probably be interested in at least some of the smaller Alpha markets for the right price. Denny Benne would probably be interested in Lebanon/Waynesville if, again, he could get the right price. In addition to his stations at the Lake, he's been assembling a small cluster along the I-44 corridor between Springfield and St. Louis over the last few years.

Might it make sense for Connoisseur to make another try at acquiring Cumulus? A couple of years ago, they offered around $15/share. Now Cumulus is trading at around 12 cents per share.

I've been wondering about that, too. That might depend on just how much backing Warshaw has from the firms covering this deal. I can't imagine Alpha will have come cheap once we see the price tag on this deal, and, despite the low stock price, Cumulus isn't likely to sell for less than $1 billion. We saw what happened to Audacy after it ended up with an additional $2 billion in debt, and it wasn't pretty. Having said that, if Connoisseur could pull off such a deal, there's less overlap than you'd expect at first glance. Some spins might be required around San Francisco, Dallas, and Chicago, but, otherwise, you're looking at Topeka and an area or two of Michigan. There might be a few more, but I don't think they'd be talking about too many. I also wonder if Cox might be a potential target for Warshaw. Apollo has been telegraphing that it would like to unload Cox Media lock, stock, and barrel. The radio and TV sides would likely have to go to separate buyers.

 

[Mark Roberts]

They may be stuck with those two along with the other stations that were decimated by Alpha's budget incinerations. What ROI is to be had by buying a forgotten AM in the middle of Missouri with no staff, no identity and no budget?

Most of the Alpha facilities in Missouri are fairly decent from a technical standpoint. Jerrell and David Shepherd made sure of that when they owned them.

 

[Mark Roberts]

You're not the only person I know who has asked that question in the last three hours or so. I'm sure Alpha has plenty of markets Connoisseur would like to get rid of, but I can't imagine anybody would want most of those small market Missouri stations. It might've had a prayer a year ago before it nuked the staff and the high school sports show that was making it money, but we're still talking about small market stations with no tangible assets. The towers were sold a long time ago, and just staying on-air requires several thousand a month to cover the tower rent.

Which is what happens when you burn the furniture and then realize you have nowhere to sit down. I'm sure some MBA thought that was a clever idea. Problem is, the operators who sold their tower sites also lost some control over distribution of content, and also pulled off the neat trick of converting a capital investment into an ongoing, recurring operating expense.

I know someone who was interested in Moberly and Lebanon but balked when he saw how much just staying on-the-air would cost every month. Most people think Connoisseur will be a major upgrade. I tend to agree as being worse than Alpha, especially after last year, would take some serious effort.

If Connoisseur approaches this differently from Alpha, whose approach was about growth for the sake of growth, then I'd agree. I wouldn't underestimate broadcasters' ability to screw it up, though.