Country Format Billing

[TheBigA]

With their own promos, never their own ads. For example, on a Boston Red Sox broadcast, I'll hear the Geico and O'Reilly ads that come down the pipe from the network along with ads for Boston hospitals, banks, etc.

So what you're saying is that those ads could be "network" ads from the Bruins Radio Network or the NHL Network, not from Sirius.

An advertiser who buys time on the Boston Bruins is heard on multiple platforms, with Sirius being one. Not a one or the other thing.

Comparatively, what ads do you hear, for example, on Mad Dog Radio, or their internally produced programming?

 

[MarkW]

Unless Connoisseur’s offer had a provision to ensure that debt holders got paid, cash needed to be quickly raised by selling assets. Management/Board needs to accept the most superior overall offers. Shareholders are last in line and usually get wiped out in bankruptcy.

For clarity's sake, I'm not referring to any offer presented during Bankruptcy, which occurred several years ago. I'm talking about the offer presented in mid-2022.

More:

For A Second Time, Cumulus Rejects Warshaw-Led Buyout Offer.

A consortium led by Connoisseur Media CEO Jeff Warshaw made a second unsolicited offer to acquire Cumulus Media for $15-$17 per share, Inside Radio has confirmed. The latest overture to

www.insideradio.com

However, you do raise some good points!

Many credit agreements contain covenant language regarding "change of control." Often times, such language requires written Creditor consent (by simple majority or sometimes super majority) before a change of control is deemed permissible pursuant to credit agreement terms.

Bond indentures can also contain similar language; in fact, depending on the nature of the language, bondholders may be able to force the Issuer to repurchase their bonds if a change of control occurs.

In the vast majority of cases, Creditors almost assuredly would prefer an asset sale over an equity sale for the very reason you stated; an asset sale's waterfall would allow Lenders / bondholders to be paid first whereas an equity sale on an out-of-court basis simply involves a swap of ownership (the selling shareholders get paid, and unless a separate deal is made, the debt holders receive nothing) with no change to the debt stack.

This is not to necessarily say an equity sale is something that debt holders would always frown upon; there are some cases where an ownership change would be beneficial (this often but not always would be in the context of an M&A-type scenario). There are also instances where the would-be purchaser(s) agree to invest substantial fresh cash into the business being acquired, which conceivably could be used to support working capital needs, future add-on acquisition opportunities, or debt reduction.

I've not studied the Credit Agreements or Bond Indenture(s) closely enough in Cumulus' case; however, it is certainly possible restrictive covenants similar to those summarized above do exist, in which case the Creditors pretty much "hold the keys" relative to any takeover offer. This certainly could partially explain the apparent lack of shareholder lawsuits against the Board following the Board's unanimous rejection of Connoisseur's offer.

Of note, while most of the equity in "New Cumulus" coming out of Chapter 11 was allocated to prepetition creditors, what is unclear to me today is the extent to which there is overlap between the parties who held debt in Cumulus versus the parties who currently hold equity in Cumulus.

If Connoisseur or anyone else wants to acquire Cumulus, they likely should focus on buying up debt as opposed to making an offer for the equity. His $15 to $17 per share offer equates to something like a $270 million to $300 million price range. To scoop up 51 percent of the debt at par value would require an additional ~$150 million, I believe, and that assumes the holders of those instruments would be willing to accept par value as opposed to a premium price.

 

[TheBigA]

This certainly could explain the lack of shareholder lawsuits following the Board's unanimous rejection of Connoisseur's offer.

If you look at the bios of the current board members, you'll see they're all very experienced in areas of M&A. They know what kind of offer this was, and turned it down repeatedly. The fact that this is the only known offer for the company, and that this party hasn't made any other public offers like this says a lot. Looking at his purchase history, he has acquired several stations out of the iHeart trust at fire sale prices. That's all I see.

Comparatively, there was a very public offer made for iHeart from John Malone a few years ago that was ultimately withdrawn.

 

[CTListener]

So what you're saying is that those ads could be "network" ads from the Bruins Radio Network or the NHL Network, not from Sirius.

An advertiser who buys time on the Boston Bruins is heard on multiple platforms, with Sirius being one. Not a one or the other thing.

Comparatively, what ads do you hear, for example, on Mad Dog Radio, or their internally produced programming?

Yes, they are definitely ads from the Bruins network. On the in-house sports talk channels, I hear the get-out-of-debt hucksters and other bottom-feeding advertisers, along with tons of promos for other channels.

 

[TheBigA]

Yes, they are definitely ads from the Bruins network. On the in-house sports talk channels, I hear the get-out-of-debt hucksters and other bottom-feeding advertisers, along with tons of promos for other channels.

That's because Sirius can't really tell advertisers what they're getting. They may do surveys of their subscribers, but for the most part they don't have actual certified demos on who listens to what. Some of their channels are monitored for various reasons, such as The Highway is monitored by Mediabase to quantify what songs they play. But TTBOMK they don't encode for Nielsen. So most ads are per inquiry.

 

[Theater of My Mind]

As someone who actually programmed five XM channels years ago and who was part of "inner circle" meetings and conferences, I learned that a high percentage of subscribers are people who are forced to be in their vehicle for many hours: local and long distance truckers, salespeople, service providers to homes and offices, etc. Second are people with splinter tastes that can't be satisfied by terrestrial radio but which are strong enough to make them willing to spend money.

People with 10 to 15 minute commutes and who don't use the car for work are less likely to subscribe. People in smaller radio markets where there is a lack of a full format spectrum locally may want to subscribe.

I wonder if this has changed since you were there. SXM has shifted a of of their focus to the app & streaming so subscribers don't have to be in their cars to listen anymore. They dropped the additional fee they used to charge for streaming access a while ago.

 

[vchimpanzee]

Perfect example. Lots of variety, everything a listener could want,

Sirius/XM doesn't have anything I want. I would have to listen to six or seven different channels, and even then, there are songs that aren't anywhere as far as I know.

Willie's Place or whatever it's called would probably play the country music I like.

 

[wadio]

Do you have Sirius?

Yes.

Have you ever listened to the ads? Are they the same ads that get played on broadcast radio?

I don't know. I don't listen to broadcast radio, only streaming and SiriusXM.

You still haven't answered my question about demos. Which tells me you don't know

I assume this is the exchange to which you refer?

​

How do you know "money demos" listen to Sirius? A lot of their channels are aimed at boomers.​

And a lot aren't.​

My point was simply that each SiriusXM listener is one listener removed from exposure to the ads on broadcast radio. There are plenty of SXM channels aimed at younger demos so they don't hear the broadcast ads. Same for streaming but fortunately the streams contain targeted ads which are likely to be more effective for the advertiser and help to support the content.

One thing I'll tell you is that Sirius doesn't sell local advertising. Broadcast radio does.

That's a given.

 

[TheBigA]

My point was simply that each SiriusXM listener is one listener removed from exposure to the ads on broadcast radio.

If they listen to music on Sirius, they are also removed from ads there as well, since the music channels are ad-free. You assume that all Sirius listeners isolate themselves completely from broadcast radio, and I don't think that's true.

My point is that the subscription base for Sirius is less than 10% of the number who listen to broadcast radio. Most advertisers are aware that there are other platforms besides broadcast radio. So they know in order to reach the most people, they have to advertise in many places. The difference between advertising on Sirius and broadcast radio is that broadcast radio can tell the advertiser the specific size of the audience and the demographics, which Sirius cannot.

Same for streaming but fortunately the streams contain targeted ads which are likely to be more effective for the advertiser and help to support the content.

Some do and some contain a mix of local broadcast ads and the streaming ads inserted by the streaming platform. It depends on the platform and the show. The broadcaster originating the stream has to get paid somehow for what you hear.

I don't listen to broadcast radio, only streaming and SiriusXM.

But some of the streaming you do is of broadcast radio shows.

 

[wadio]

The difference between advertising on Sirius and broadcast radio is that broadcast radio can tell the advertiser the specific size of the audience and the demographics, which Sirius cannot.

But you can't advertise on SiriusXM, right?

Some do and some contain a mix of local broadcast ads and the streaming ads inserted by the streaming platform. It depends on the platform and the show. The broadcaster originating the stream has to get paid somehow for what you hear.

True, but both types of ads support the stream.

But some of the streaming you do is of broadcast radio shows.

Almost all, so I'm grateful for the ad support.

 

[TheBigA]

But you can't advertise on SiriusXM, right?

The non-music channels are ad-supported. As I discussed with someone else, those ads may come from the program producer, which may be a broadcast station or syndicator. The actual Sirius ads are either promos or 1-800 spots.

True, but both types of ads support the stream.

So in that way you're still exposed to the ads on broadcast radio, even if it uses a different platform. In one way or another you get counted in the audience for that show on that station.

 

[Kelly A]

This again? There's not enough billing period to justify Audacy or any major operator to run music on AM in 2023 (or whenever you first pitched this).

Not to mention, AM sounds like poo for music. At least as compared with just about anything else, let alone FM.

 

[CTListener]

Forgot to mention another kind of ad that I've heard on SiriusXM's talk and news channels, though not sports: Ads from trucking companies, recruiting drivers. Not sure whether these make more money for SXM than the get-out-of-your-timeshare pitches, but at least there's no hyperbole involved in them, and what's being advertised is exactly what the product is: trucking jobs.

 

[davideduardo]

Usually, an outside investment banking firm is engaged to develop marketing materials, perform outreach to possible buyer candidates (to invite them to execute an NDA so they can access the data room), collect Non-Disclosure Agreements, populate a virtual data room, establish bidding procedures, and collect and summarize bids. There are usually at least two rounds of bidding if multiple viable offers are presented. Bids upon conclusion of each round are usually presented to the Board of Directors - or an independent committee empowered by the Board of Directors - to evaluate. If a Chief Restructuring Officer is in place (which was not the case here), then that person may have sole authority over which bid(s) to accept or reject.

That might be the case with an entire enterprise undergoing a stress sale or a bigger company leaving the radio sector. But if a company is just selling one or just a few individual non-productive stations or an un-competitive small cluster in one market, they will engage one of the experienced station brokerage firms to put together a package for identifiable possible buyers.

Potential buyers with extreme interest will sign non-disclosures, and if document inspection retains the needed interest, only then will full documentation and an actual physical facility "due diligence" be performed.

If there are more than single offers, then management will make recommendations. For single station sales, it is likely that the board will have given management a green light to determine the preferred offer or to, in some cases, turn down inadequate single offers.

I cannot say for certain if such a process was conducted in this instance. Hence, my earlier question if a formal process along the above lines was conducted. I presume Cumulus was actively looking to sell the stations in question. I would love to know if offers came from any other parties.

Unless one of them feels they are out of the non-disclosure restrictions, it is probable that it will not be known.

The most recent sale of this kind is the multi-market divestiture of all of TelevisaUnivision's horrible AMs and its worst total markets. In that case, the likely buyer was known in the business to be a well known conservative groups and, out of the blue, a progressive Democrat buyer was assembled and the near done-deal status changed.

In this case, the competitive bid came to prevent conservative control of the stations. Due diligence was only done to adjust final issue such as leases and contracts and any pending litigation or claims.

I agree it's unlikely that anyone else matched EMF's offers; EMF can also close quickly (i.e. no financing contingencies), which gives them a big advantage.

Many groups have lines of credit, just like a home buyer has an advantage if they have a quantified pre-approval.

I'm a little surprised one or more activist shareholders have not brought suit against the Cumulus board for refusing the offer from Connoisseur to purchase the outstanding equity. Just goes to show that a very high percentage of CMLS shares must be owned by insiders.

The Connoisseur offer was a "distress sale" proposition with a lot of stuff the Cumulus board did not like. That was pretty widely discussed in the industry. With the current situation regarding revenue and listenership in radio, we have seen quite a few "take it or leave it" bargain basement offers, most of which are refused. Those are generally made directly to the CEO and the board, without intermediaries. Some border on the definition of "hostile takeovers" if there is sufficient discontent among shareholders of a weak seller who might be convinced that fifty cents on the dollar is better than a bankruptcy.

 

[davideduardo]

In a lot of the sports, Sirius merely reruns feeds from other companies, not internally produced coverage. So a lot of those ads are coming from the producing company, and not Sirius. In some cases, it could even be the local radio station. As you said, Sirius replaces some of those ads with their own. A lot of the national sports come from broadcast syndicators, and their spots run there as well as on broadcast stations. So advertisers are buying multiple platforms (streaming too) not just broadcast.

And in many cases, local team rights are primarily owned by the team's sports marketing division with the local station getting a portion of the inventory as part of the deal. The station sells to accounts and categories not reserved by the team.

So the satellite rights may require the team sponsors to run, but not the locals station spots. And, in sports, every situation can be different as a national broadcast may include rights held by both of the game teams as well as the league itself. And there may be one of the sports syndicators involved, too, particularly in college sports.

 

[davideduardo]

Forgot to mention another kind of ad that I've heard on SiriusXM's talk and news channels, though not sports: Ads from trucking companies, recruiting drivers. Not sure whether these make more money for SXM than the get-out-of-your-timeshare pitches, but at least there's no hyperbole involved in them, and what's being advertised is exactly what the product is: trucking jobs.

And that shows how long distance and regional truckers are such a large group of satellite users. In particular, they spend lots more time with satellite radio than the average 25 minute home-to-work commuter does.

A former announcer for the Univision Recuerdo network I managed bought trucks. With every surplus, he has bought another truck and he now has over a dozen. He told me that an important driver recruiting item is having "free satellite radio". While all his drivers are Hispanic, all are second generation or later and don't use Spanish language radio (which satellite has never manage dot do well).

What this indicates is how significant satellite radio is to truckers who routinely leave the coverage areas of local AM or FM stations.

 

[davideduardo]

I wonder if this has changed since you were there. SXM has shifted a of of their focus to the app & streaming so subscribers don't have to be in their cars to listen anymore. They dropped the additional fee they used to charge for streaming access a while ago.

It's changing, but slowly. Sirius/XM knows that eventually streams will end the need for satellite distributions and they want to be in the space. But the percentage of use of satellite outside of cars is the vastly smaller percentage.

I have a satellite subscription, but don't use it at home as there are many vastly better programmed offerings available online than Sirius/XM which still has its obsession with deep cuts and generally mediocre talent on hosted services.

 

[DOB]

I really am jealous of all these people who are able to enjoy satellite radio, I wish that I could too.
There's some very good channels that play some amazing music I love that will never be heard on ota radio.
For me personally I can't deal with the sound quality, some great sound systems like Cadillac do all that they can to make it as good as possible but for me it doesn't work. Obviously I can't listen to many streaming options either.
The talk programming is fine.

 

[davideduardo]

The non-music channels are ad-supported. As I discussed with someone else, those ads may come from the program producer, which may be a broadcast station or syndicator. The actual Sirius ads are either promos or 1-800 spots.

Some are indeed satellite-sold spots, such as the many related to insurance, medications, credit repair and the like. Nearly all are "call to buy" or to sign up or whatever, which indicates a PI spot to me.

 

[davideduardo]

I really am jealous of all these people who are able to enjoy satellite radio, I wish that I could too.
There's some very good channels that play some amazing music I love that will never be heard on ota radio.
For me personally I can't deal with the sound quality, some great sound systems like Cadillac do all that they can to make it as good as possible but for me it doesn't work. Obviously I can't listen to many streaming options either.
The talk programming is fine.

I agree with you. On the 6-year-old car I just traded in, satellite music sounded OK. But my new one came with an overpriced premium sound system (to order one without would have made me wait for 6 to 7 months) and on it, the satellite sound is noticeably annoying, particularly if I listen for longer periods of time.