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Convergence

S

SirRoxalot

Interesting reading from Tom Taylor's newletter. One story talks about Clear Channel possibly going public to raise cash ahead of a lot of debt coming due in 2016. CC hasn't paid down much debt since they went private in 2008, and even paying the interest is getting onerous. An IPO would try to sell the public on the idea that they can get in on a company that's positioning itself for the future by relying on digital to supplement their OTA radio revenue.

Just how much of a difference-maker is digital? Well, the NAB says that digital will hit the $500-million mark this year - across the board in radio - not just at Clear Channel. Sounds big, eh? BTW, what does radio bring in as an industry? Approximately $17.5-Billion, or $17,500-million. So, digital is a little less that 3% of revenue. That's revenue, mind you, not profit. Yet physical plant is suffering from neglect and lack of engineering support, tower sites are being sold off, and programming costs are continuing to shrink while money is poured into digital. Not to mention the enormous sums that Clear Channel still has to pay in debt service.

Anybody else ready to line up to invest in Clear Channel if they do an IPO?
 
SirRoxalot said:
Anybody else ready to line up to invest in Clear Channel if they do an IPO?
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You picked the wrong place to ask about investing. Speaking for myself, I invested a lot in radio ten years ago, but sold it all as the prices fell in 2007 and 8. Even satellite radio has lost value since then.

Two things about your post: It confirms what I've been saying for years that CC has not been cutting staff to pay down its debt, because the debt is largely unchanged. They've instead redirected that money to digital assets, and they're ready to see what it's worth.

And digital will pay off for radio companies. It already has for CBS. If you examine CBS since they left Buffalo, they've focused on creating unified adverting platforms in the markets where they operate. Those platforms are organized around local websites: CBSlocal. The driving force is local TV, but obviously radio is driving a lot of eyes to those websites, and it all promotes the local CBS brand. This has really paid off for CBS in a big way, even though CBS radio isn't growing. The profits CBS enjoyed in the 4th quarter helped the company achieve its all time high of $67 a share.

Clear Channel doesn't have TV, but it has the iheartradio brand, which it markets on TV with its annual festival, and its first annual iheartradio Awards on NBC this year. Can a new brand, which leads to a new advertising platform completely change the perception of CC in the minds of investors? Clearly Pandora, which has yet to turn a profit, has done that. Their stock price is also at an all-time high. I'm sure CC execs are looking at that as an example of how a company with successful digital assets is a better investment than a company with strictly radio assets.
 
CC has apparently been cutting staff just to pay interest because they haven't reduced the debt. They've also spent money developing their digital platform, but they're STILL barely keeping up with the interest payments, and the debt remains onerous.

Comparing Clear Channel with CBS is laughable. In case you haven't noticed, TV generates a LOT more money than radio. The CBS quarterly reports treat radio as an afterthought. Are they doing well? Yes. Is it because radio is driving people to their websites? I suspect its largely because TV is driving eyes to the local websites. Radio benefits from the synergy, obviously, but, as you say, CBS radio isn't growing - and they're one of the groups that DOES invest more heavily in programming.

Clear Channel is arranging the mirrors and getting ready to light the smoke pots before they run out of time in 2016.
 
SirRoxalot said:
CBS radio isn't growing - and they're one of the groups that DOES invest more heavily in programming.
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Moral of the story: Investing in radio programming doesn't result in more growth.

SirRoxalot said:
Clear Channel is arranging the mirrors and getting ready to light the smoke pots before they run out of time in 2016.
Click to expand...

My other comparison was to Pandora. Pandora stock has more than doubled since the IPO. Yet they've not turned a profit, and their music costs continue to increase. Now Spotify is considering an IPO. They're actually paying more for music than Pandora. I'd bring up the dot-com bubble that ate up billions of dollars back in the 90s, but no one can remember that. Bottom line, and the answer to your original question, is I bet they get a lot of takers if they do an IPO. Wall Street has a short memory.
 
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You're the one, actually, who said that CBS Radio isn't growing. Got a source for that statement? According to their 4th Quarter report, CBS radio was flat, which was good considering that they didn't have political advertising this year. It's a little hard to break out radio-only numbers because they lump radio and TV into "Local Broadcasting", and you get radio-only information only if there are specific questions from analysts or Les Moonves mentions it. So, your contention that "Investing in radio programming doesn't result in more growth" is built on faulty logic.

One thing's for sure: At least 90% of radio's revenue comes from RADIO programming. Investing in THAT, and promoting RADIO as an ad medium is likely to yield the best results. Radio promo budgets at this point are a fraction of what they were in the past. Is it any wonder that it's seen as an "old" and "dying" medium? NOBODY'S TELLING THEM ANY DIFFERENT. Yet they're STILL LISTENING.
 
TheBigA said:
Moral of the story: Investing in radio programming doesn't result in more growth.
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At this point in radio, investing more in programming to at least SLOW the decline, is a smart investment---unless you're in favor of allowing the acceleration of decline in the value of assets, eventually leading to bankruptcy.

My other comparison was to Pandora. Pandora stock has more than doubled since the IPO. Yet they've not turned a profit, and their music costs continue to increase. Now Spotify is considering an IPO. They're actually paying more for music than Pandora.
Click to expand...

This is more because of Pandora being a high-profile "fad" stock. Stocks like that often see pps increases and decreases that are not reflective of reality. Pandora, for example, after yet another dismal earnings report in 2012 Q2, finally sank to a not-so-unreasonable sub $8 pps. They are now closing in on $40 per share and still just as unprofitable. Nearly a 500% increase and still ZERO profit.

Hopes and dreams says the bubble.
 
The pigs will get led to slaughter on a Clear Channel IPO. One of the big houses may underwrite the deal with Bain and make millions, but the dot com bust and radio in general will leave most savvy investors wary. The twinkle of "digital" may charm a few buyers, but the wise ones will stay on the side lines. The speculators will buy it, pump it up and dump it. Few will hold. Widows and orphans will again get burned if they get close to this fire.
 
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