From a business standpoint, buying a company that has incured a lot of debt with your own company which also has a lot of debt *only* makes sense if you believe you have a way to *earn more* from the combined revenues than at least the interest you are paying on that debt. While some may argue economies of scale, I have yet to see that work in practice in any material sense, especially in the radio industry, which makes me suspect that
@Theater of My Mind's arguments on this have a lot more validity than you give him/her credit for.
Core to advanced business school training is the idea that you "never use your own money if you can borrow at a lower rate of return than your projected rate of earnings on the borrowed money". Unless there is a disruptive event, like a mega-recession or totally new technology that invalidates yours, this is a concept that has worked since the Industrial Revolution began.
What I think is most likely to happen should this merger actually occur is that jobs and over-the-air stations will disappear faster than they otherwise would if both IHeart and XM had not merged.
That is just a guess. The rate of disappearance of radio stations is increasing every quarter. Even more, we are seeing hundreds of AM stations going to very low non-directional power which means that the only reason those stations are on the air is to allow a translator to operate. Were that requirement of keeping the AM on the air to be eliminated, we'd see well over a thousand AMs going off permanently.
Advertising agencies, like everybody else, should be careful of what they wish for. While it is true that in monopolistic and monopolistic competition (where there are only a few big companies to deal with), advertising agencies will have to deal with fewer people when purchasing national advertising time, it is also true that the prices they will pay for their national ad campaigns will actually rise as there will be little to no competition for their ad dollars from other over-the-air broadcasters.
Ad agencies have metrics for new media, based on quantitative audience measurement. If anything, there are more alternatives today than back when they had radio, TV and print. If you look at ad supported options in new media, there is everything from ads on news sites, neighborhood sites, affinity group sites, as well as via search engines, podcast providers and lots more. That is vastly more "choice" than agencies and their clients had before.
As far as I can tell, those extra formats that station cluster owners put wern't very profitable, either. What happened (and this appears to be the case with Hubbard and its AM oldies and sports stations in Phoenix) is that the clusters' more profitable outlets are used to prop up the less profitable operations.
No, but you are thinking that each station in a cluster is separate. Actually, ever since there were clusters elsewhere in the world going back about 70 years or so, we have sold packages of stations together. Each one contributes and the concept is that, some or all of your cluster stations are what an advertiser buys, not each station.
This will continue to occur until the cluster owner decides that he/she doesn't want to prop up his less profitable stations and then decides to either try to sell the less profitable outlet to a religious or noncom (whose audience [mostly] doesn't support the stations' advertisers) or cancel the unprofitable stations' licenses altogether. And, if the owning company is a publically traded one, the scenario I just laid out will happen more quickly than in privately held concerns.
But that is the same thing as McDonalds does every few years: the non-productive assets are closed. There is a reason why we don't have DeSoto cars, either.
This is the downside of unregulated market capitalism.
In very regulated capitalism... what we see in Radio in Canada... even big 50 kw fulltime stations are being closed. What we have here is the advancement of technology... and the reason why every neighborhood does not have a blacksmith any longer.
Ultimately, and again this has been noted historically, without regulation, the few gain at the expense of the many. And your above paragraph sums that up quite nicely for the field of radio broadcasting.
The reason why we have national streaming content sources as well as all kinds of new web based businesses like DoorDash or Angie's List (Now "Angie's") is that the technology permits them to prosper. Back when calling someone just 50 miles away cost as much as $0.50 a minute, that was not feasible or affordable.
What you are totally ignoring is that every one of use with a 401-k or a pension plan gets their income and from those "big companies" that are actually owned by tens of thousands of people.
The last point I will make to your response is one that I have made elsewhere but bears repeating. If you have one company or person holding the licenses for all of the OTA broadcasters in a given market, then the political views of those that either do not agree with the owner or who the owner (or corporate head) has a damaging personal relationship with will be aired seldom, if at all.
Over many decades, owners of stations wishing to make money present the formats that will generate ad revenue, not personal satisfaction. In fact, the conservative Mays family was among the first to commit a major batch of stations to Air America, the now-gone liberal talk network. That effort ended not due to owner-based political philosophies but because the format could not sustain a viable, salable audience.
And while that may make for good capitalism it *most certainly* does not help a democracy, no matter how strong that democracy may be.
I have so many news sources available to me I can't name even a quarter of them.
In the 60's or 70's, in any U.S. market we had maybe 2 newspapers, maybe a couple of suburban "shopper" papers in big cities, a couple of radio stations that had "big" news images and maybe 2 or 3 decent TV news operations That is about 5 or 6 news sources in a larger city.
Today, even in Ludington, Michigan, anyone with a smartphone or computer or even an Amazon Alexa device has dozens and dozens of information sources. That seems like a stronger situation, not a degraded one.
Oh, and keep in mind that in the 50's, 60's and 70's when stations had to comply with FCC news requirements, all that 90% or more of stations did was subscribe to one of just two news agencies, UPI or AP, and read the stuff the teletype spit out for a few minutes an hour.
