> > But yanno, it works, and if it wasn't working, well, 92.7
> > would be flipped to CHR. And the doghouse would be doing
> > mornings there. And people would still be complaining
> about
> > KFRC.
>
> Just because Joe Bayliss and Don Parker gave some interview
> in the Bay Area Reporter and said that the station is doing
> well, it doesn't make it so. To say that it is "profitable"
> could mean that it is making $10,000 a year. I know, I
> know... I can already hear it... it's all about local sales,
> it isn't about overall ratings, it's about targeting the few
> key demographics that their research (and our common sense)
> generally think embrace dance music... Whatever. I think
> there is an upper bound on what you can even sell locally
> with a 0.6 12+. I agree -- their San Francisco COUNTY
> numbers (and the city/county itself has to be what they mean
> by "San Francisco"... it cannot possibly mean the whole Bay
> Area arbitron area) are not bad for their signal. But
> remember this from the investors' point of view. To make
> money on their $38 million investment (that is the # I heard
> from investors, not the $33 million quoted... maybe there
> was a mix of cash and stock given to the sellers, who
> knows), then Joe Bayliss and his crew are going to have to
> do much better than I think their strategy could ever allow,
> especially in a time when station prices are not quite what
> they were. I would argue that they would have to be taking
> $10 million to the bottom line (PROFITS, not REVENUES)
> annually to justify a sale price that would double the money
> they put in. We can argue about that # but I think given
> the station's poor signal, that it would have to be on the
> high side. And I don't think they can generate even that
> much REVENUE per year. The math just doesn't work. And at
> some point, the investors will unload the station for what
> they can get, so that their money isn't tied up any longer
> than it has to be.
>
Where do you get $10 million in profit? Stations sell for 10-15 times broadcast cash flow. It's likely their debt service is somewhere around 10% on the original purchase price (let's use $3.5 million/year for this exercise).
Depending on their operating costs (my guess is it will cost $3-$5 million to run), they'll probably need to do $8 million or so a year to break even in revenue (not profit).
But value is based on brodcast cash flow - where debt service is NOT included.
Even then, if they did $8 million and it cost $4 million to run - then it's worth anywhere from $4-$6 million in cash flow and worth $40-$90 million (depending on a potential buyer).
