Cumulus Faces NASDAQ De-listing

[secondchoice]

In a weird way AI might allow the return of smaller operators in the big markets. The "back office" billing, commercial production, commercial and music logs etc. with not be a major advantage for the big operators. Agency buys are becoming more automated and AI soon will pinpoint makrketing to the point where I am afraid there will be few if any chances to interact with a human buyer so each individual station will have to earn it's own sales instead of another station in the cluster being an add on or discounted extra buy.

I still believe FCC licenses should be sold within a year of a bankruptcy to another operator. If a corporation goes bankrupt it, it's court created successor, any of the officers, or board of directors should not be allowed to have control of an FCC license for at least 2 years.

 

[TheBigA]

In a weird way AI might allow the return of smaller operators in the big markets.

When you talk about "smaller operators," don't they already exist, with Red Apple in NYC and Saul Levine in LA? They seem to be able to operate just fine without AI.

I still believe FCC licenses should be sold within a year of a bankruptcy to another operator. If a corporation goes bankrupt it, it's court created successor, any of the officers, or board of directors should not be allowed to have control of an FCC license for at least 2 years.

As I've said, there's no legal justification for such a thing. As long as the bankrupt company follows all laws and keeps the stations operational, the FCC has nothing to say. The FCC should be thrilled that anyone wants to hold broadcast licenses anymore. Going bankrupt is not a crime.

 

[davideduardo]

"Budget cuts"? How many members of The Executive Club have taken cuts? How many of the Executive Club members with their already obscene salaries have been laid off? While stockholder equity has dropped, The Executive Club continues in their oppulent life style, obscene compensation plans, trips and junkets as well as their benefit gravy train.

In troubling times with decreasing usage of radio and changes in the ad industry, the few top management people at radio group operator companies deserve everything they earn.

And there are few such people in every company, with each one now having greater responsibilities and work loads. Their pay is not disproportionate to their positions, both in media and business in general.

 

[davideduardo]

I still believe FCC licenses should be sold within a year of a bankruptcy to another operator. If a corporation goes bankrupt it, it's court created successor, any of the officers, or board of directors should not be allowed to have control of an FCC license for at least 2 years.

In the case of radio, a good part of the bad current situation is the change in the ad industry following the pandemic years. Far less money now, after nearly 4 years of Covid which destroyed nearly every entertainment medium, from concerts to radio to movie theatres and the like.

A licensee is not responsible for economic conditions that affect their income. And they should not be blamed for something out of their control.

And the officers may have done a marvelous job at trying to keep from totally sinking... even if they were eventually not successful.

Such a rule would totally destroy any investor's interest in owning radio or TV stations and would make most of us who have careers in management look for options outside the business.

(And you fail to blame the FCC for much of this, including licensing too many stations and technical facilities that a unviable and culminating with Docket 80-90 which destroyed smaller market radio all over the country and hurt even medium and some large markets, too.)

 

[Theater of My Mind]

In the case of radio, a good part of the bad current situation is the change in the ad industry following the pandemic years. Far less money now, after nearly 4 years of Covid which destroyed nearly every entertainment medium, from concerts to radio to movie theatres and the like.

I's never radio's fault, it's --- (spin the wheel) --- FOUR years of Covid! Which affects every entertainment industry equally and permanently.
Like concerts...




Then again, concerts are actually still entertaining. And the talent hasn't all been fired.

 

[PTBoardOp93]

Over the air radio has a declining future, and the ad industry is moving its focus to new media.

It would be interesting to know how much ad spend a major brand, say Coca-Cola or Tide, spent on traditional media 20 years ago vs today. I'm sure such information is considered proprietary.

(I suspect both brands are at zero dollars spent on radio today)

 

[secondchoice]

Such a rule would totally destroy any investor's interest in owning radio or TV stations

Exactly what should happen a decade or two ago. Wall Street loaded up the industry with debt where everything has to go perfect in order to pay the debt.

IMHO: Folks that actually want to operate stations should be able buy stations without "legacy debt". Yes investors have "taken haircuts" but these operations have be restructed for the lenders to still recoup debt. From a set date on: if a corporation goes bankrupt it and the restructured corporation are financially unfit to hold a FCC broadcasting license an have one year to sell it. The lenders will stop lending to broadcasters except for tangible assets.

And another thought about the whole bankruptcy industry all executive bonuses payed in the last two years should be returned to estate of the corporation. For two years after the restructuring executive bonus should be limited percentage wise to what percentage of the corporation's restructed debt is paid back. Using bankruptcy as a tool of business to allow excuntives to go on living the high life while the lenders and average employee suffers has to stop.

I believe bankruptcy in the US was originally intended to end "debters prisons" to give folks who ended up economicly screwed and chance to start over. Not to prop up failing corporations.

 

[TheBigA]

IMHO: Folks that actually want to operate stations should be able buy stations without "legacy debt".

No problem. Buy an AM for $100K. Scott Fybush can show you some properties. You guys want to be able to buy a full market FM for nothing, and that's not going to happen.

Plus, after you buy the station, you have to STAFF and OPERATE it. The reason no "radio people" are rushing out and buying stations is because they know the REAL expense is operations. There, you have to pay salaries, deliver benefits, pay insurance, and all of that can be more than the price of a station. A basic staff of ten people plus benefits is over a million. In this economy, you won't bill that amount in the first year. Then what?

Salem is on the market right now. Anyone with money can buy any Salem station. Ask yourself why only a couple stations have been sold.

 

[TheBigA]

I's never radio's fault, it's --- (spin the wheel) --- FOUR years of Covid! Which affects every entertainment industry equally and permanently.
Like concerts...Then again, concerts are actually still entertaining. And the talent hasn't all been fired.

Actually the concert business is slowing down. This past year there were festivals that were canceled because they hadn't sold enough tickets.

The reason concerts came back is because people wanted to get out of the house. Radio doesn't offer that opportunity.

 

[Theater of My Mind]

No problem. Buy an AM for $100K. Scott Fybush can show you some properties. You guys want to be able to buy a full market FM for nothing, and that's not going to happen.

Plus, after you buy the station, you have to STAFF and OPERATE it. The reason no "radio people" are rushing out and buying stations is because they know the REAL expense is operations. There, you have to pay salaries, deliver benefits, pay insurance, and all of that can be more than the price of a station. A basic staff of ten people plus benefits is over a million. In this economy, you won't bill that amount in the first year. Then what?

Salem is on the market right now. Anyone with money can buy any Salem station. Ask yourself why only a couple stations have been sold.

Because those stations are trash, they have no ratings and no brand equity, many of them are inferior AM signals and the company is millions of dollars in debt.

A couple of local guys just bought Stephen King's top rated, full-market WKIT FM in Bangor. One is a career broadcaster who always wanted to own his own station. So yeah, it can happen. Pretty slim pickins out there for anything good, not loaded with debt, and affordable for small businessmen, though.

Why don't you buy a station since you can't stop talking about it?

 

[TheBigA]

Why don't you buy a station since you can't stop talking about it?

Been there, done that. I'm responding to other posters who can't stop talking about it. They've never spent a dime on radio and don't know what's involved. I do, and that's why I reply.

 

[secondchoice]

Plus, after you buy the station, you have to STAFF and OPERATE it. The reason no "radio people" are rushing out and buying stations is because they know the REAL expense is operations. There, you have to pay salaries, deliver benefits, pay insurance, and all of that can be more than the price of a station. A basic staff of ten people plus benefits is over a million. In this economy, you won't bill that amount in the first year. Then what?

Depends on the market, there are "satellite" services that give you a decent ( under #100 markets only) instant format. Personally I would VT in the bigger markets. There still are talented folks working in smaller markets that would love the exposure and extra money. Production expense is a good thing. The real expense will be starting a sales team.

Anybody that buys a station at 10 times the positive cash flow or more is a fool, unless there is a killer construction permit. IMHO 5 times the positive cash flow is doable. You have some room for a downturn.

The current corporate radio ownership model (big three) only works with bankruptcy.

One definition of insanity is doing the same thing over and over and expecting a different result.

 

[gr8oldies]

I's never radio's fault, it's --- (spin the wheel) --- FOUR years of Covid! Which affects every entertainment industry equally and permanently.
Like concerts...

View attachment 8291


Then again, concerts are actually still entertaining. And the talent hasn't all been fired.

Concerts, sports, theme parks and entertainment venues are all sold out but "the economy is a dystopian hellscape"

 

[TheBigA]

Depends on the market, there are "satellite" services that give you a decent ( under #100 markets only) instant format.

Yes I know. Isn't that was corporate radio does? Why do you want small owners to buy stations and run them JUST LIKE the big corporate guys???

If the result is going to be exactly the same, what difference does it make who the owner is? People don't listen to owners and don't care if the owner is bankrupt.

 

[davideduardo]

Why don't you buy a station since you can't stop talking about it?

I have owned stations... about a dozen of them, including 10 in million-plus markets. I could easily buy a cluster of three or four FMs in the market I live in if I so wished. and for the mid to low seven figures.

But I don't want that.

It is about revenue when I say this. Plenty of people still listen to radio. But the local economy has moved away from businesses that buy local radio and have been replaced by chain stores, services and restaurants that nearly never buy radio. The remaining smaller retail and service companies put most of their money online and spend big amounts with Yelp and Open Table and the like.

And local TV, hurt by the changes in their industry, sells "with video" at the rates the top radio stations here used to get. So they are taking away a lot of what used to go to radio.

The agency business is in a transformation period, with immense consolidation (I still get Advertising Age); they find more profits on new media, though, and use far less radio, TV, Cable, Print and "old stuff". And they love that as there is more fee based work and less fixed "agency commission" stuff. Not about audience, again... it is about making more money.

So that is the larger part of the reason why I don't buy stations. And that is why lots of owners want to get out.

 

[davideduardo]

Anybody that buys a station at 10 times the positive cash flow or more is a fool, unless there is a killer construction permit. IMHO 5 times the positive cash flow is doable. You have some room for a downturn.

And then you are financing at around 9% today, plus saving for the principal payments. That leaves you with perhaps a taxable 5% ROI, which you can also get with tax-free muni.

And that is why prices are dropping still more.,

 

[TheBigA]

A couple of local guys just bought Stephen King's top rated, full-market WKIT FM in Bangor. One is a career broadcaster who always wanted to own his own station.

There's more to the story. The broadcaster partnered with an area businessman:

Local Group Formed To Acquire WKIT

With Stephen King set to shutdown his three stations in Bangor ME at the end of the month, a pair

radioinsight.com

That's what you need. Somebody with cash who can afford to park some of it on a radio station. Cumulus needs another revenue stream, like these two guys. The problem companies like Cumulus have is they depend too much on advertising. When that slows down, they're in trouble.

 

[Kent]

Anybody that buys a station at 10 times the positive cash flow or more is a fool, unless there is a killer construction permit. IMHO 5 times the positive cash flow is doable. You have some room for a downturn.

Literally no one is doing that today. I don’t think we've seen double digit multiples, at least not in normal situations, in roughly 15 years now. Even five times multiples aren’t common (if not outright rare) today.

The current corporate radio ownership model (big three) only works with bankruptcy.

They bought when everyone thought the only future was up. Before private equity bought it (and before the market crashed), Clear Channel had manageable debt levels despite paying high multiples. One of my friends recently said private equity screws everything up. Looking at recent bankruptcies and closures, I have a hard time arguing against that.

That's what you need. Somebody with cash who can afford to park some of it on a radio station. Cumulus needs another revenue stream, like these two guys. The problem companies like Cumulus have is they depend too much on advertising. When that slows down, they're in trouble.

While I agree that radio needs to diversify to be successful long-term, saying a company like Cumulus needs another revenue stream alone doesn’t solve the problem. The challenge is finding something that goes hand-in-hand with radio today. Otherwise, why bother owning radio stations at all? Insurance companies got into radio because they thought radio stations would help them lower their claims by alerting people of bad weather and other events that might cause casualties. Auto dealers and electronic companies owned radio stations to help showcase the sound systems in their cars and stores. CBS, ABC, and NBC owned radio stations to promote their record labels' artists. INSILCO, which was one of the predecessors to iHeart, had to find a use for the copper waste uncovered during silver mining. If you can’t find a business that can benefit from radio, you’re just putting money into a white elephant.

 

[secondchoice]

And then you are financing at around 9% today, plus saving for the principal payments. That leaves you with perhaps a taxable 5% ROI, which you can also get with tax-free muni.

And that is why prices are dropping still more.,

If you don't have financing it looks better.
That's why my idea of the not having FCC licenses as collateral for a loan might be the only way for end the bankruptcy merry go round.

Using you example if you put your cash in instead of financing you would get a 14% ROI.

I recall back something in the 1970's someone said 80 90's goal was to make radio stations like corner gas stations if one shuts down the one across the street picks up the business.

I realize some stations might go away. That might need to happen anyways.

 

[Kent]

If you don't have financing it looks better.
That's why my idea of the not having FCC licenses as collateral for a loan might be the only way for end the bankruptcy merry go round.

Banks, in general, haven’t lended against FCC licenses in years. They tend to have problems collecting when they let purchases use those as collateral. That’s another reason the deal market is so cold and why private equity has gotten its tentacles so deep in the industry.

I realize some stations might go away. That might need to happen anyways.

Many of those stations licensed in Docket 80-90 probably shouldn’t have been licensed. The problem is the cat has been out of the bag for going on 45 years, and the audience has spoken. People want the additional choice those stations provide. They don’t want to go back to the days of Top-40/CHR and AOR stations playing everything under the sun. Going back to the pre-1980’s era of radio will just guarantee even fewer people will bother with the radio.